G.R. No.

L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO,
PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO
ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA,
TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO
AMANCIO, DANILO B. MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE
PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION,
GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO
BOCALING and GODOFREDO CUETO, respondents.
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-employee relationship exists between
petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM) and respondent San
Miguel Corporation, is the main issue in this petition. The disputed decision of public respondent Ronaldo Zamora,
Presidential Assistant for legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct Court of Industrial
Relations, charging San Miguel Corporation, and the following officers: Enrique Camahort, Federico Ofiate
Feliciano Arceo, Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor
practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875 and of Legal dismissal. It
was alleged that respondents ordered the individual complainants to disaffiliate from the complainant union; and
that management dismissed the individual complainants when they insisted on their union membership.
On their part, respondents moved for the dismissal of the complaint on the grounds that the complainants are not
and have never been employees of respondent company but employees of the independent contractor; that
respondent company has never had control over the means and methods followed by the independent contractor
who enjoyed full authority to hire and control said employees; and that the individual complainants are barred by
estoppel from asserting that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and testimonial and documentary evidences
were duly presented, although the actual hearing was delayed by several postponements. The dispute was taken
over by the National Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the hearing of
the case intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred in by the NLRC in
a decision dated June 28, 1976. The amount of backwages awarded, however, was reduced by NLRC to the
equivalent of one (1) year salary.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In turn, the
assistant informs the warehousemen and checkers regarding the same. The latter, thereafter, relays said orders to
the capatazes or group leaders who then give orders to the workers as to where, when and what to load, unload,
pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles
manufactured to be loaded and unloaded, as well as the business activity of the company. Work did not
necessarily mean a full eight (8) hour day for the petitioners. However, work,at times, exceeded the eight (8) hour
day and necessitated work on Sundays and holidays. For this, they were neither paid overtime nor compensation
for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons and
wooden shells they were able to load, unload, or pile. The group leader notes down the number or volume of work
that each individual worker has accomplished. This is then made the basis of a report or statement which is
compared with the notes of the checker and warehousemen as to whether or not they tally. Final approval of report
is by officer-in-charge Camahort. The pay check is given to the group leaders for encashment, distribution, and
payment to the petitioners in accordance with payrolls prepared by said leaders. From the total earnings of the
group, the group leader gets a participation or share of ten (10%) percent plus an additional amount from the
earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other companies or
departments of SMC plant, even when the volume of work was at its minimum. When any of the glass furnaces
suffered a breakdown, making a shutdown necessary, the petitioners work was temporarily suspended. Thereafter,
the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140) organized and
affiliated themselves with the petitioner union and engaged in union activities. Believing themselves entitled to
overtime and holiday pay, the petitioners pressed management, airing other grievances such as being paid below
the minimum wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to buy raffle
tickets, coerced by withholding their salaries, and salary deductions made without their consent. However, their
gripes and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in connection
with the dismissal of some of its members who were allegedly castigated for their union membership and warned
that should they persist in continuing with their union activities they would be dismissed from their jobs. Several
conciliation conferences were scheduled in order to thresh out their differences, On February 12, 1969, union
member Rogelio Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the
complainant union through its officers headed by National President Artemio Portugal Sr., presented a letter to the
respondent company containing proposals and/or labor demands together with a request for recognition and
collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.

On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence of an
employer-mployee relationship as borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship between them and the
respondent company and that they were dismissed for unionism, an act constituting unfair labor practice "for which
respondents must be made to answer."

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to
respondent company's glass factory despite their regularly reporting for work. A complaint for illegal dismissal and
unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.

Unrebutted evidence and testimony on record establish that the petitioners are workers who have been employed
at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years of service at the time of their
termination. They worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading, piling or palleting
empty bottles and woosen shells to and from company trucks and warehouses. At times, they accompanied the
company trucks on their delivery routes.

The question of whether an employer-employee relationship exists in a certain situation continues to bedevil the
courts. Some businessmen try to avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70
SCRA 139).

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate passes
signed by Camahort and were provided by the respondent company with the tools, equipment and paraphernalia
used in the loading, unloading, piling and hauling operation.

In determining the existence of an employer-employee relationship, the elements that are generally considered
are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which

the work is to be accomplished. It. is the called "control test" that is the most important element (Investment
Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra,
and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an employer-employee relationship
between petitioner workers and respondent San Miguel Corporation. The respondent asserts that the petitioners
are employees of the Guaranteed Labor Contractor, an independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the following criteria: "whether
or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required;
the term and duration of the relationship; the right to assign the performance of a specified piece of work; the
control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment
of the contractor's workers; the control of the premises; the duty to supply the premises tools, appliances,
materials and labor; and the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46;
See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a specified piece of
work, the nature and extent of the work and the term and duration of the relationship. The records fail to show that
a large commercial outfit, such as the San Miguel Corporation, entered into mere oral agreements of employment
or labor contracting where the same would involve considerable expenses and dealings with a large number of
workers over a long period of time. Despite respondent company's allegations not an iota of evidence was offered
to prove the same or its particulars. Such failure makes respondent SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked continuously
and exclusively for the respondent company's shipping and warehousing department. Considering the length of
time that the petitioners have worked with the respondent company, there is justification to conclude that they were
engaged to perform activities necessary or desirable in the usual business or trade of the respondent, and the
petitioners are, therefore regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial
Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor Relations Commission, 127
SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission (supra):
... [T]he employer-employee relationship between the parties herein is not coterminous with each loading and
unloading job. As earlier shown, respondents are engaged in the business of fishing. For this purpose, they have a
fleet of fishing vessels. Under this situation, respondents' activity of catching fish is a continuous process and
could hardly be considered as seasonal in nature. So that the activities performed by herein complainants, i.e.
unloading the catch of tuna fish from respondents' vessels and then loading the same to refrigerated vans, are
necessary or desirable in the business of respondents. This circumstance makes the employment of complainants
a regular one, in the sense that it does not depend on any specific project or seasonable activity. (NLRC Decision,
p. 94, Rollo).
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the
petitioners, thereafter, promptly returned to their jobs, never having been replaced, or assigned elsewhere until the
present controversy arose. The term of the petitioners' employment appears indefinite. The continuity and
habituality of petitioners' work bolsters their claim of employee status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been executed between respondent SMC
and the alleged labor contractor, respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work

premises, and other materials which are necessary in the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to qualify
as an independent contractor under the law. The premises, tools, equipment and paraphernalia used by the
petitioners in their jobs are admittedly all supplied by respondent company. It is only the manpower or labor force
which the alleged contractors supply, suggesting the existence of a "labor only" contracting scheme prohibited by
law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of
the Labor Code). In fact, even the alleged contractor's office, which consists of a space at respondent company's
warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the conduct of its business, in the maintenance thereof or in
the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an employer-employee
relationship whether between respondent company and petitioners or between the alleged independent contractor
and petitioners. It is important to emphasize that in a truly independent contractor-contractee relationship, the fees
are paid directly to the manpower agency in lump sum without indicating or implying that the basis of such lump
sum is the salary per worker multiplied by the number of workers assigned to the company. This is the rule in
Social Security System v. Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries the
workers were entitled to, arrived at by adding the salaries of each worker which depend on the volume of work
they. had accomplished individually. These are based on payrolls, reports or statements prepared by the workers'
group leader, warehousemen and checkers, where they note down the number of cartons, wooden shells and
bottles each worker was able to load, unload, pile or pallet and see whether they tally. The amount paid by
respondent company to the alleged independent contractor considers no business expenses or capital outlay of
the latter. Nor is the profit or gain of the alleged contractor in the conduct of its business provided for as an amount
over and above the workers' wages. Instead, the alleged contractor receives a percentage from the total earnings
of all the workers plus an additional amount corresponding to a percentage of the earnings of each individual
worker, which, perhaps, accounts for the petitioners' charge of unauthorized deductions from their salaries by the
respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have to cite
our rulings in Dy Keh Beng v. International Labor and Marine Union of the Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if payment by the piece is just a method of compensation
and does not define the essence of the relation. Units of time . . . and units of work are in establishments like
respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon.
We cannot construe payment by the piece where work is done in such an establishment so as to put the worker
completely at liberty to turn him out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
... the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were directly employed by him.
Firmly establishing respondent SMC's role as employer is the control exercised by it over the petitioners that is,
control in the means and methods/manner by which petitioners are to go about their work, as well as in
disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and
manner of performing the same is practically nil. For, how many ways are there to load and unload bottles and
wooden shells? The mere concern of both respondent SMC and the alleged contractor is that the job of having the
bottles and wooden shells brought to and from the warehouse be done. More evident and pronounced is
respondent company's right to control in the discipline of petitioners. Documentary evidence presented by the
petitioners establish respondent SMC's right to impose disciplinary measures for violations or infractions of its
rules and regulations as well as its right to recommend transfers and dismissals of the piece workers. The interoffice memoranda submitted in evidence prove the company's control over the petitioners. That respondent SMC
has the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who is alleged
by SMC to be a representative of the alleged labor contractor, is the strongest indication of respondent company's
right of control over the petitioners as direct employer. There is no evidence to show that the alleged labor

contractor had such right of control or much less had been there to supervise or deal with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case of retrenchment due to the closure or cessation of operations
of the establishment or undertaking. But such is not the case here. The respondent's shutdown was merely
temporary, one of its furnaces needing repair. Operations continued after such repairs, but the petitioners had
already been refused entry to the premises and dismissed from respondent's service. New workers manned their
positions. It is apparent that the closure of respondent's warehouse was merely a ploy to get rid of the petitioners,
who were then agitating the respondent company for benefits, reforms and collective bargaining as a union. There
is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to warrant their
separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is clear that the
respondent company had an existing collective bargaining agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the company's glass plant, the petitioners
cannot merely form a union and demand bargaining. The Labor Code provides the proper procedure for the
recognition of unions as sole bargaining representatives. This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is hereby
ordered to REINSTATE petitioners, with three (3) years backwages. However, where reinstatement is no longer
possible, the respondent SMC is ordered to pay the petitioners separation pay equivalent to one (1) month pay for
every year of service.
SO ORDERED.

G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts
are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960
by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr.
Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service,
Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a
branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for
the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by
the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on
the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World
Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the
board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the
office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at
the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no
longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the
mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and,
finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962
to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees
with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims.
For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without
prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court
a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were
joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which
was elevated the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS.
LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT
(WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE
RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS
VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS
ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST
WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT
MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY
FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED

MERELY AS GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or
TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her
and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as
a imediately columnist had been in the travel business prior to the establishment of the joint business venture with
appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one
of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the
premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist
World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 1415, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own,
separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no
participation in nor connection with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and
not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She
shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof
aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the
salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and
supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering
the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35
tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager
for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36
tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate
secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World
Service, Inc. and as such was designated manager. 1
xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World Service,
Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It
likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such,
she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE
KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O.
SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED
THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE
APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE
RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS
WHICH ADHERES TO THE RULE OF LAW.
II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP
PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE
WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED
ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN
JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD
SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and
Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion
being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and
consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the
evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally
and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the
appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was
a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on
the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that
relation between the between parties was one of joint venture, but concede that "whatever might have been the
true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and
Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc.,
maintains, that the relation between the parties was in the character of employer and employee, the courts would
have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial
Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In
general, we have relied on the so-called right of control test, "where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be used in reaching
such end." 10 Subsequently, however, we have considered, in addition to the standard of right-of control, the
existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist
World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the
first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidum
as and for rental payments, an arrangement that would be like claims of a master-servant relationship. True the
respondent Court would later minimize her participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own
money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the
parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run
by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in
on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control
of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own
gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions
from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary
usually, she earned compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee.
As we said, employment is determined by the right-of-control test and certain economic parameters. But titles are
weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina
Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she
expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in effect,
accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or property contributed 15 and where each party
exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves out as
partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a
distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It
is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the
case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service,
Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla
herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business
undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts,
that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent
of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel
agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had
assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals.
She continued the business, using her own name, after Tourist World had stopped further operations. Her interest,
obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to
the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner,
Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and
padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no
evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20 Yet,
what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected.
Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and
as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that
Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate
that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has
ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the
equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly
named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be
ousted from possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the
petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that
Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for
another company. What the evidence discloses, on the other hand, is that following such an information (that
Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing
the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the

takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the
branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by
the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. "
22
It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five
months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of
the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business
operations, and in the process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to
be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist
World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded
for "breaches of contract where the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla
from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of
Article 21 of the Civil Code, in relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages
in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that
she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot
therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25
and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the
circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975,
by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the
sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum
of P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.

G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS CORPORATION
and/or OTTO ONG and CATALINA CO., respondents.
PADILLA, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside the Resolution 1 of
respondent National Labor Relations Commission (NLRC) rendered on 20 September 1994 remanding the
records of the case to the arbitration branch of origin for further proceedings.
The antecedent facts as narrated by public respondent in the assailed resolution are as follows:
The complaint was instituted by Eddie Domasig against respondent Cata Garments Corporation, a company
engaged in garments business and its owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid
commission and other monetary claim[s]. Complainant alleged that he started working with the respondent on July
6, 1986 as Salesman when the company was still named Cato Garments Corporation; that three (3) years ago,
because of a complaint against respondent by its workers, its changed its name to Cata Garments Corporation;
and that on August 29, 1992, he was dismissed when respondent learned that he was being pirated by a rival
corporation which offer he refused. Prior to his dismissal, complainant alleged that he was receiving a salary of
P1,500.00 a month plus commission. On September 3, 1992 he filed the instant complaint.
Respondent denied complainant's claim that he is a regular employee contending that he is a mere commission
agent who receives a commission of P5.00 per piece of article sold at regular price and P2.50 per piece sold in
[sic] bargain price; that in addition to commission, complainant received a fixed allowance of P1,500.00 a month;
that he had no regular time schedule; and that the company come [sic] into existence only on September 17,
1991. In support of its claim that complainant is a commission agent, respondent submitted as Annexes "B" and
"B-1" the List of Sales Collections, Computation of Commission due, expenses incurred, cash advances received
for the month of January and March 1992 (Rollo, p. 22-27). Respondent further contends that complainant failed
to turn over to the respondent his collection from two (2) buyers as per affidavit executed by these buyers (Rollo p.
28-29) and for which, according to respondent it initiated criminal proceedings against the complainant.
The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement and backwages as
well as underpayment of salary; 13th month pay; service incentive leave and legal holiday. The Arbiter also
awarded complainant his claim for unpaid commission in the amount of P143,955.00. 2
Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid, the NLRC
resolved to remand the case to the labor arbiter for further proceeding. It declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on record. The issue of whether or not
complainant was a commission agent was not fully resolved in the assailed decision. It appears that the Labor
Arbiter failed to appreciate the evidences submitted by respondent as Annexes "B" and "B-1" ( Rollo p. 22-27) in
support of its allegation as regard[s] the nature of complainant's employment. Neither is there a showing that the
parties were required to adduce further to support their respective claim. The resolution of the nature of
complainant's employment is vital to the case at bar considering that it would be determinative to his entitlement of
monetary benefits. The same is similarly true as regard the claim [sic] for unpaid commission. The amount being
claim [sic] for unpaid commission as big as it is requires substantial proof to establish the entitlement of the
complainant proof to establish the entitlement of the complainant to the same. We take not of the respondent's
claim that "while they admit that complainant has an unpaid commission due him, the same is only for his
additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain price for a total sum of (P20,135.00 +
2,655.00) or P22,820.00 as appearing in the list of Sales and unpaid commission" (Annex "C" and "C-1" Appeal,
Rollo p. 100-102). Said amount according to respondent is being withheld by them pending the accounting of
money collected by complainant from his two (2) buyers which was not remitted to them. Considering the
conflicting version of the parties regarding the issues on hand, it was incumbent on the Labor Arbiter to conduct
further proceedings thereon. The ends of justice would better be served if both partied are given the opportunity to
ventilate further their positions. 3
In their comment on the petition at bar, private respondents agree with the finding of the NLRC that the nature of
petitioner's employment with private respondents is vital to the case as it will determine the monetary benefits to
which he is entitled. They further aver that the evidence presented upon which the labor arbiter based her decision
is insufficient, so that the NLRC did not commit grave abuse of discretion in remanding the case to the arbitration

branch of origin for further proceedings.

The comment of the Solicitor General is substantially the same as that of private respondents, i.e., there is no
sufficient evidence to prove employer-employee relationship between the parties. Furthermore, he avers that the
order of the NLRC to the labor arbiter for further proceedings does not automatically translate to a protracted trial
on the merits for such can be faithfully complied with through the submission of additional documents or pleadings
only.
The only issue to be resolved in this petition is whether or not the NLRC gravely abused its discretion in vacating
and setting aside the decision of the labor arbiter and remanding the case to the arbitration branch of origin for
further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the petitioner, consisting of the
identification card issued to him by private respondent corporation and the cash vouchers reflecting his monthly
salaries covering the months stated therein, settled the issue of employer-employee relationship between private
respondents and petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient
as a basis for judgment on the existence of employer-employee relationship. No particular form of evidence is
required is required to prove the existence of such employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. 4
Substantial evidence has been defined to be such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, and its absence is not shown by stressing that there is contrary evidence on
record, direct or circumstantial, for the appellate court cannot substitute its own judgment or criterion for that of the
trial court in determining wherein lies the weight of evidence or what evidence is entitled to belief. 5
In a business establishment, an identification card is usually provided not only as a security measure but mainly to
identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers
covering petitioner's salaries for the months stated therein, we agree with the labor arbiter that these matters
constitute substantial evidence adequate to support a conclusion that petitioner was indeed an employee of
private respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides thus:
Sec. 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memoranda, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary
evidence, if any, from any party or witness.
It is clear from the law that it is the arbiters who are authorized to determine whether or not there is a necessity for
conducting formal hearings in cases brought before them for adjudication. Such determination is entitled to great
respect in the absence of arbitrariness. 6
In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding of the NLRC, her
decision at least on the existence of an employer-employee relationship between private respondents and
petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due, expenses incurred and cash advances
received (Exhibits "B" and "B-1") which, according to public respondent, the labor arbiter failed to appreciate in
support of private respondents" allegation as regards the nature of petitioner's employment as a commission
agent, cannot overcome the evidence of the ID card and salary vouchers presented petitioner which private
respondents have not denied. The list presented by private respondents would even support petitioner's
allegations that, aside from a monthly salary of P1,500.00, he also received commissions for his work as a
salesman of private respondents.
Having been in the employ of private respondents continuously for more than one year, under the law, petitioner is
considered a regular employee. Proof beyond reasonable doubt is not required as a basis for judgment on the

legality of an employer's dismissal of an employee, nor even preponderance of evidence for that matter,
substantial evidence being sufficient. 7 Petitioner's contention that private respondents terminated his employment
due to their suspicion that he was being enticed by another firm to work for it was not refuted by private
respondents. The labor arbiter's conclusion that petitioner's dismissal is therefore illegal, is not necessarily
arbitrary or erroneous. It is entitled to great weight and respect.
It was error and grave abuse of discretion for the NLRC to remand the case for further proceedings to determine
whether or not petitioner was private respondents' employee. This would only prolong the final disposition of the
complaint. It is stressed that, in labor cases, simplification of procedures, without regard to technicalities and
without sacrificing the fundamental requisites of due process, is mandated to ensure the speedy administration of
justice. 8
After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers, including
issuance of subpoena, requiring the attendance and testimony of witnesses or the production of such
documentary evidence as may be material to a just determination of the matter under investigation.
Additionally, the National Labor Relations Commission and the labor arbiter have authority under the Labor Code
to decide a case based on the position papers and documents submitted without resorting to the technical rules of
evidence. 9
However, in view of the need for further and correct computation of the petitioner's commissions in the light of the
exhibits presented and the dismissal of the criminal cases filed against petitioner, the labor arbiter is required to
undertake a new computation of the commissions to which petitioner may be entitled, within thirty (30) days from
the submission by the partied of all necessary documents.
WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November 1994 are SET
ASIDE. The decision of the labor arbiter dated 19 may 1993 us REINSTATED and AFFIRMED subject to the
modification above-stated as regards a re-computation by the labor arbiter of the commissions to which petitioner
maybe actually entitled.
SO ORDERED.

G.R. No. L-66890 April 15, 1988

HERMINIO FLORES and HERMINIA FLORES, petitioners,

vs.
FUNERARIA NUESTRO and /or FORTUNATO NUESTRO and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.

prayer for reinstatement shows that petitioners were not abandoning their work . 3 As aptly observed by the
Solicitor General, to uphold the ruling of the respondent Commission that the petitioners abandoned their job "is to
put a premium on the commission of a crime by an employer against an employee to force the latter to leave his
employment so as to preclude said employee from seeking reinstatement with backwages."

YAP, J.:
In this petition for certiorari, petitioners seek to annul and set aside the decision of the National Labor Relations
Commission (NLRC), dated December 6, 1983, dismissing their complaint for illegal dismissal but ordering
respondents to pay them their living allowances from October 1980 until October 1982 when their employment
was terminated. Petitioners pray that judgment be rendered ordering the respondents (1) to reinstate them to their
former or equivalent positions, with full backwages from the time of their illegal dismisss up to their actual
reinstatement, or if reinstatement should become impossible because of the strained relations between petitioners
and respondent, to pay them separation pay; and (b) to pay petitioners their unpaid benefits provided for under all
the labor standard laws invoked by them.

Where there is a finding of illegal dismiss, the general principle is that an employee is entitled to reinstatement and
to receive backwages from the date of his dismissal up to the time of his reinstatement. However, the
circumstances in this case make the reinstatement of petitioners no longer feasible; any possible confrontation
between the parties in view of their already strained relationship should be avoided. An award of six (6) months
backwages based on their latest is a reasonable alternative to reinstatement under the circumstances. 4 As found
by the respondent Commission, respondent should also pay the petitioners their living allowances from October
1980 until October 1982 when their employment relations were severed. As to petitioners' other money claims, we
find no reason to disturb the Commission's ruling disallowing them for insufficiency of evidence.

It appears from the record that petitioner spouses Herminio and Herminia Flores had worked for respondent
Fortunato Nuestro in his funeral parlor known as Funeraria Nuestro since June, 1976, respectively, as helperutility man and as bookkeeper, embalmer and cashier. On October 7, 1980, respondent Fortunato Nuestro
registered the petitioner spouses with the Social Security System, as his employees with a monthly salary of
P200.00 each. Thereafter, Herminio Flores was paid P750.00 a month, plus P200.00 monthly allowance, while
Herminia's salary was increased to P500.00 a month. The petitioners were given living quarters right inside the
compound of the funeral parlor.

WHEREFORE, the decision appealed from is modified, and respondent is hereby ordered to pay each petitioner
1) backwages equivalent to six (6) months pay, and 2) cost of living allowances from October 1980 until October
1982.
SO ORDERED.

On October 30,1982, Herminio Flores and respondent Fortunato Nuestro had an altercation, during which the
former was physically assaulted by the latter and suffered a punctured wound on the lower and an abrasion in the
scapular region (L). Herminio was treated at the Bataan Provincial Hospital and subsequently, he filed an action
for slight physical injuries against the respondent, which was docketed as Criminal Case No. 2249 of the Municipal
Court of Pilar, Bataan. Respondent, however, claimed that he merely shoved the arm of Herminio when the latter
pointed a finger at him and uttered abusive remarks against him. As a result of the incident and fearing for his
safety, petitioner Herminio Flores, together with his family, was compelled to vacate his living quarters at the
funerall parlor and had to seek protection from the Integrated National Police of Pilar, Bataan.
On November 15, 1982, petitioners filed a complaint against respondent for illegal dismissal, underpayment of
living allowances, non-payment of five (5) days incentive leave and non-payment of overtime compensation. The
respondent denied the existence of employer-employee relation with the petitioners and further alleged that in any
event the petitioners had abandoned their work on October 30, 1982.
On May 23,1983, Labor Arbiter Federico Bernardo rendered a decision finding that no employer-employee
relationship existed between the parties and dismissing the complaint. He held that Herminio Flores was merely a
contractual worker paid on a piece-work basis, while Herminia Flores was a domestic helper; and that on October
30, 1982, they abandoned their work.
On appeal, the National Labor Relations Commission, while holding that an employer-employee relationship
existed between the parties, found that the petitioners had abandoned their work, thus precluding them from
seeking reinstatement with backwages. However, the Commission ordered respondent to pay the petitioners their
living allowances from October 1980 until October 1982 when the employment relations were severed.
In finding the distance of an employer-employee relationship between respondent and petitioners, the NLRC
committed no grave abuse of discretion. That the respondent had registered the petitioners with the Social
Security System is proof that they were indeed his employees. The coverage of Social Security Law is predicated
on the existence of an employer-employee relationship. 1
On the issue of abandonment, however, we find the ruling of the NLRC that petitioners had abandoned their
employment to be contrary to the evidence. To constitute abandonment, there must be a clear and deliberate
intent to discontinue one's employment without any intention of returning back . 2 The record shows that petitioners
were only compelled to leave the premises, which they regarded as their home, when the respondent inflicted
physical injuries upon petitioner Herminio Flores. Apparently, what they had given up was only their place of
residence but not their jobs. The immediate filing of a complaint for illegal dismissal against respondent with a

G.R. No. 102467 June 13, 1997

EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES, President & Director GEORGE L.
GO, Vice-Chairman & Director RICARDO J. ROMULO, Vice-Chairman & Director JOHN C.B. GO, Director
HERMINIO B. BANICO, Director FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director RICARDO C.
LEONG, Director JULIUS T. LIMPE and Director PEDRO A. ORTIZ, petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, First Division, and RICARDO L. SADAC, respondents.
VITUG, J.:
In the special civil action of certiorari, the petitioners, in order to have a reasonable chance of success, must be
able to come up with proof that the tribunal, board or officer against whom the petition is brought has, in the
exercise of judicial or quasi-judicial function, acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction. In the instant petition, the Court is asked to rule against the
National Labor Relations Commission ("NLRC") in holding private respondent Ricardo L. Sadac, Vice-President
for the Legal Department and General Counsel of petitioner Equitable Banking Corporation, to have been a
regular employee of the bank whose services could only be terminated in accordance with the Labor Code.
Petitioner bank submits that the services of private respondent, its legal counsel, could be dispensed with at
anytime pursuant to the provision on the cessation of lawyer-client relationship under Rule 138 of the Rules of
Court.
The facts, essentially, do not appear to be in dispute.
Private respondent Sadac was appointed, effective 01 August 1981, Vice-President for the Legal Department of
petitioner bank by its then President, Manuel L. Morales, with a monthly salary of P8,000.00, plus an allowance of
P4,500.00 and a Christmas bonus equivalent to a two-month salary. 1 On 08 December 1981, private respondent
was also designated as the bank's General Counsel. Private respondent had these functions:
Duties & Responsibilities
Provides legal advice to the Board of Directors and Management of the Bank.
Takes charge of all Bank cases arising from bank transactions and rendering opinions on legal questions in
connection therewith.
Insures effective conduct of litigation, collection of past due accounts, and investigation of irregularities and
other legal matters affecting the interest of the Bank.
Participates in action of major character, financing, amendments to the Articles of Incorporation and By-laws of
the Bank, changes in corporate structures acquisition and disposal of important segments of enterprises or real
estate, determination of action to comply with statutory and other government requirements.
Directs, plans, coordinates and maintains supervision and control over the staff of the Legal Department.
Provides for and insures proper documentation and notarization of all Bank transactions.
Assumes primary responsibility in the account of continuing research and studies on questions of law affecting
the Bank and its subsidiary corporations and the formulation and development of legal opinions.
Recommends appointments, promotions, transfers and disciplinary actions involving Legal Department
personnel.
Establishes and maintains effective discipline, work performances, high level of morale and cooperation among
the staff.
Performs such other duties as may be assigned from time to time by the President and the Board of Directors. 2
The turning point in the relationship among the parties surfaced, when, on 26 June 1989, nine lawyers 3 of the
bank's Legal Department, who were all under private respondent, addressed a "letter-petition" to the Chairman of
the Board of Directors, accusing private respondent of abusive conduct, inefficiency, mismanagement,
ineffectiveness and indecisiveness. 4 The individual written complaints of each of the nine lawyers were attached
to the "letter-petition." Private respondent was furnished with a copy of the letter.
Private respondent promptly responded and manifested an intention to file criminal, civil and administrative
charges against the nine lawyers. Petitioner Morales, by now Chairman of the Board of Directors, called the
contending lawyers to a conference in his office in an attempt to resolve their differences. The meeting held on 29
June 1989, in the presence of Vice-President for Personnel and Human Relations Dean Alejandro C. Reyes,
apparently did not amount to much and only resulted, it would seem, in a broad commitment of the parties to
implement the "existing procedures and practices in the Legal Department." 5 The dialogue was marked, in fact, by

"rancorous and very heated altercation" between private respondent and his subordinates. Mr. Morales considered
the problem serious enough to merit the Board's attention. In its meeting on 11 July 1989, the Board of Directors,
apprised of the situation, adopted a resolution directing one of its directors, petitioner Herminio B. Banico, to look
further into the matter and to "determine a course of action for the best interest of the bank."
Petitioner Banico met with the complaining nine lawyers on 17 July 1989. He was warned that if private
respondent were to be retained in his position, the lawyers would resign en masse. The following day, Mr. Banico
saw private respondent. The latter denied the charges leveled against him. Although the two would appear to have
explored various alternatives and avenues to solve the crisis, nothing positive, however, came out of their meeting.
Convinced that reconciliation was out of the question, Mr. Banico, on 08 August 1989, submitted a report to the
Board of Directors with these findings:
a. ABUSIVE CONDUCT
There is no doubt at all, in my mind that the charge of "abusive conduct" against Atty. Sadac, in his treatment in
varying degrees, of the complaining lawyers, is true, as this is supported by overwhelming evidence. Atty. Sadac
himself, in effect, admitted this when he proferred his apologies in the presence of the Chairman in the
"confrontation" held in the latter's office.
b. MISMANAGEMENT
In my study and investigation, I found abundant evidence to support a finding of mismanagement of the Legal
Department by Atty. Sadac.
c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS
The above specific charges are each proven and/or established by the same nature of evidence.

Two days later, or on 10 August 1989, Mr. Morales issued a memorandum to private respondent which, among
other things, pertinently stated:
. . . The Board, however, feels that because during all its existence of almost forty (40) years, the Bank never had
in its employ any senior officer who had compelled it to resort to the unfortunate, sorry and nasty spectacle of
conducting a formal hearing (which of course is distasteful to all parties concerned) of whatever charge such as
the one lodged against you just to terminate your services, consonant with the due process requirements of the
Constitution, the Labor Code, the Implementing Regulations thereof and other pertinent laws, it has chosen the
more compassionate option of waiting for your voluntary resignation from your employ with the Bank.
In the meantime, since all the lawyers under you, by petitioning for a change in leadership of the department
despite the fact that all these lawyers have all been hired and promoted to their positions upon your
recommendation, have thus shown lack of confidence in you, the Board feels it has no reason to continue
reposing confidence in you and therefore elected to exercise its prerogative as your client, under the rules of client
and lawyer relationship to direct Atty. William R. Veto, Legal Counsel of the Bank these many years to appear in
substitution of you in all the cases in which you are presently appearing as counsel of record for the Bank. For this
purpose, the Bank as your client, therefore, instructs you to deliver the folders of pleadings and documents of all
cases you are now personally handling and submit a list of all the cases where you appear as the counsel of
record for the bank and the corresponding titles thereof not later than the close of office hours on Tuesday, August
15, 1989 so that the Legal Counsel of the Bank, Atty. William R. Veto, could file his substitution of appearance in
all said cases where you are counsel of record. Atty. Veto has already been instructed and authorized by the
Board to take over from you the functions that you are now performing in the Legal Department. 7
Reacting to the above memorandum, private respondent, on 14 August 1989 addressed a letter to Board
Chairman Morales, furnishing the other members of the Board, to the effect that the report of Mr. Banico contained
libelous statements and that the implementation of the chairman's memorandum would lead to an illegal dismissal.
Pointing out that he could not now in conscience resign in the face of Mr. Banico's "baseless and libelous
findings," private respondent requested for a full hearing by the Board of Directors so that he could clear his name.
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman, answered private respondent. Mr.
Romulo stressed that private respondent's services were not terminated by the Board which, instead, was merely
exercising its managerial prerogative "to control, conduct (its) business in the manner (it) deems fit and to regulate
the same." In reply to private respondent's request for a formal hearing, Mr. Romulo reiterated the Board's

decision that it would be to the best interest of all concerned if the "distasteful spectacle" of a hearing would not be
resorted to "in order to adhere to (the bank's) long standing compassionate policy." 9 Mr. Romulo also said:
We would like to emphasize that our decision as a Board did not dismiss you from the service of the Bank. All that
the Board is saying to you is that it has lost its confidence in you and therefore it is patiently awaiting your
resignation of course with your right of retirement pay in accordance with the policy adopted by the Bank under
these situations. Trust or confidence like love are feelings which emanate from the heart and, as the song goes,
"once a heart is torn apart it is never the same again." So also confidence like a tooth once pulled can never be
restored. 10
In his memorandum of 28 August 1989 to the members of the Board, private respondent again made a request for
a full hearing and cautioned that, under Section 31 of the Corporation Code, individual members of the Board
could be held accountable for voting or assenting to patently unlawful acts of the corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:
7. The charge that you have been constructively dismissed is likewise without basis because as we said before,
you are free to remain in the employ of the bank if you so wish, even if the bank were to incur the tremendous
expense of continuing to pay your high salary just so it can continue to adhere to its compassionate policy of
avoiding ruining the future of any of its officers by a possible dismissal for cause which is certainly bound to leak to
the public. It is believed, however, that there is no law which can compel an employer to give any of his employees
any particular work at all. 11
Mr. Romulo stated that the bank's confidence on private respondent had been lost "most especially in the light of
(his) threats" and that the latter could "bring the matter up in the appropriate forum." 12
Undaunted, private respondent, in his memorandum of 07 September 1989 to the individual members of the
Board of Directors, persisted in his request for a formal investigation. 13 Having been unheeded, private
respondent, on 09 November 1989, filed with the Manila arbitration branch of the NLRC, a complaint, docketed
NLRC Case No. 00-11-05252-89, against herein petitioners for illegal dismissal and damages. 14
After learning of the filing of the complaint, the Board of Directors, on 21 November 1989, adopted Resolution No.
5803 terminating the services of private respondent "in view of his belligerence" and the Board's "honest belief that
the relationship" between private respondent and petitioner bank was one of "client and lawyer." Private
respondent was removed from his office occupancy in the bank and ordered disentitled, starting 10 August 1989,
to any compensation and other benefits. The Board instructed management to take the necessary steps to
"defend itself and all the members of the Board of Directors" from private respondent's complaint. 15
Pursuing their stand that the association between the bank and private respondent was one of a client-lawyer
relationship, herein petitioners filed a motion to dismiss the complaint with the NLRC on the ground of lack of
jurisdiction. 16 Private respondent, opposing the motion, insisted on the existence of an employer-employee
relationship between them. 17 In their reply, petitioners added another ground for seeking a dismissal of the
complaint, i.e., that under the ruling in Besa vs. PNB, 18 the rule governing the duration of private respondent's
term was provided for by the Rules of Court and not by the Labor Code. 19
Following an exchange of position papers and other pleadings, Labor Arbiter Jovencio Ll. Mayor, Jr., on 02
October 1990, rendered a decision dismissing the complaint for lack of merit. 20 The Labor Arbiter was convinced
that the relationship between petitioner bank and private respondent was one of lawyer-client based on the
functions of the latter which "only a lawyer with highly trained legal mind, can effectively discharge." 21 He
distinguished the instant controversy from the situation in Hydro Resources Contractors Corporation vs.
Pagalilauan 22 in that herein private respondent, he said, only performed functions encompassed by the practice of
law while in Hydro Resources, the involved lawyer was a "mere legal assistant" tasked with certain duties not all
that related to the practice of law. The Labor Arbiter concluded that the complaint stated no cause of action
because a lawyer-client relationship should instead be governed by Section 26, Rule 138, of the Rules of Court.
On whether or not there were valid grounds to terminate the services of private respondent, the Labor Arbiter,
noting the "letter-petition" of the nine subordinate lawyers of private respondent, said:
. . . The truth and veracity of these complaints were respectively affirmed under oath by each and every one of
these nine subordinate lawyers in their individual affidavits (Annexes "1-J" to "1-R", inclusive), (Ibid). From these

individual statements, it can be culled that complainant has been charged, among others, with committing such
acts as shouting and insulting lawyers even in the presence of clients, having frequent outbursts of temper, being
indecisive even on simple and fundamental questions, of devoting time to private and personal matters such that
he is always out of the office, of being closed and narrow minded to the ideas of subordinates, and other similar
acts. These charges were never refuted by herein complainant and instead narrated a general refutation . . . 23
The Labor Arbiter brushed aside private respondent's claim that he was denied due process, holding that private
respondent was "heard exhaustively on the matter of the charge lodged against him" and that, "for valid practical
reasons," petitioners "were not in a position to accede" to the demand for a formal hearing. 24
On appeal, the NLRC concluded differently. On 24 September 1991, the First Division of the NLRC rendered a
resolution 25 reversing the decision of the Labor Arbiter. It held that private respondent was an employee of
petitioner bank which "never stated that complainant was an outside counsel for he was never so" 26 as against the
pronouncement of the Court in Hydro Resources that distinguished between an in-house counsel and an outside
counsel hired on a retainer basis. Certain other circumstances that likewise did not escape NLRC's attention were
that petitioner George L. Go, the bank's president, had enjoined private respondent to attend a bank-sponsored
symposium on Japanese investment on 08 September 1989 at the Hotel Intercontinental; that in petitioners' letter
of 31 August 1989, private respondent was referred to as an employee; that in another letter, dated 24 November
1989, petitioner admitted having terminated private respondent's employment and requested the return of the
1988 Mitsubishi Galant 1800 which he had acquired through the bank's car plan; and that, through a
communication of 02 January 1990 of the Personnel and HRD Department, the bank announced that private
respondent's employment had been terminated effective 21 November 1989.
Turning to the issue of whether or not the employment of private respondent was terminated for cause, the NLRC
held that because he had not been afforded a hearing in accordance with law, there was no factual basis to
support the allegation of loss of confidence made by petitioners who, instead, had relied on the doctrine of res
ipsa loquitor.
The NLRC ruled that private respondent was denied the right to due process with the bank's failure to observe the
twin requirements of notice and hearing. The 10th August 1989 memorandum could not have been a substitute for
notice because it did not manifest petitioners' intention to dismiss him from employment, and neither the meeting
between private respondent and the complaining lawyers nor those held between private respondent and
petitioner Banico could be considered the "investigations" which private respondent had consistently sought.
For having been made to undergo unnecessary embarrassment by being stripped of his functions and made "to
undergo the sad and painful experience of reporting to office every day doing nothing," the NLRC, citing Sibal vs.
Notre Dame of Greater Manila, 27 awarded damages.
The NLRC, thereby concluded:
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby,
SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former position as bank Vice-President and
General Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other
benefits from the time his compensation was withheld to his actual reinstatement, as well as moral damages of
P100,000.00, exemplary damages of P50,000.00, and attorney's fees equivalent to Ten Percent (10%) of the
monetary award. Should reinstatement be no longer possible due to strained relations, the respondents are
ordered likewise jointly and severally to grant separation pay at one (1) month per year of service in the total sum
of P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991 (cut-off date
subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorney's fees equal to Ten Percent (10%) of all the monetary award, or a grand total
of P1,649,329.53.
SO ORDERED. 28
Petitioners filed a motion, 29 opposed by private respondent, 30 for a reconsideration of the resolution.
The motion for reconsideration was still pending when private respondent, following an exchange of yet additional
pleadings, filed an urgent ex-parte motion for immediate reinstatement grounded on Article 223 of the Labor Code.

31

On 07 November 1991, NLRC Executive Clerk Pascual Y. Reyes addressed a communication, with the
letterhead of the First Division of the NLRC, to Attys. Vicente Abad Santos and William R. Veto, counsel for
petitioners, which read:
G R E E T I N G S:
Consistent with the NLRC New Rules and Procedure on Appeal under Republic Act 6715, amending Article 223 of
the Labor Code, RESPONDENT(s) is/are hereby directed within ten (10) calendar days from receipt of this Order:
To immediately reinstate complainant under the same terms and conditions prevailing prior to his dismissal or
separation or, at RESPONDENT(s) option to reinstate him in the payroll, and to submit proof of compliance
thereof, otherwise, a Writ of Execution shall issue. 32
Petitioners filed a motion to quash the "untitled document" which was claimed to be "highly irregular." Private
respondent countered, on the strength of the ruling in Aris (Phil.) Inc. vs. NLRC, 33 that even before its amendment
by Section 12 of R.A. 6715, Article 223 of the Labor Code already allowed execution of decisions of the NLRC
pending their appeal to the Secretary of Labor and Employment, and that, under Section 2, Rule XII, of the New
Rules of Procedure of the NLRC, Executive Clerk Reyes could be said to be performing a function similar or
equivalent to that discharged by the Clerk of Court of the Court of Appeals.
Petitioners, on their part filed an urgent motion for immediate resolution of their motion for reconsideration,
account of what was felt to be the "dubious legality" of the directive for reinstatement.

34

on

Pending the above incidents, particularly the motion for reconsideration of NLRC's resolution that has reversed the
Labor Arbiter's decision, petitioners have filed the instant petition for certiorari, with prayer for the issuance of a
writ of preliminary injunction, before this Court. The petition questions the resolution of the NLRC finding that an
employer-employee relationship existed between petitioner bank and private respondent invoking the rulings in
Besa vs. PNB 35 and Asis vs. Minister of Labor and Employment, 36 against that of Hydro Resources Contractors
vs. Pagalilauan; 37 that the facts on record do support valid grounds for terminating the employment of private
respondent; and that due process has been duly observed. The petition likewise assails the NLRC for its monetary
awards and in omitting to resolve the allegation of forum-shopping committed by private respondent.
This Court required petitioners to post a cash bond in the amount of P500,000.00 for the issuance of a temporary
restraining orders. 38
Prefatorily, the Court must state that the filing of a motion for reconsideration of a decision of the NLRC is
prerequisite to the elevation of the case to this Court on a petition for certiorari. The rule is aimed at enabling the
commission to look into and correct its error or mistake, if any has been committed, without the precipitate
intervention of this Court. 39 The failure to allow that opportunity for whatever reason is ordinarily a fatal procedural
defect that could warrant the dismissal of the petition. 40
In this case, petitioners, instead of waiting for the resolution by the NLRC of their motion for reconsideration,
posthaste filed the instant petition. Its prematurity notwithstanding, the instant petition for certiorari was given due
course in order not to unduly delay the final disposition of the case considering that the issues involved 41 have
heretofore been ventilated practically to the limit by the parties.
While the Court agrees with private respondent that execution pending appeal may be ordered by the NLRC, 42 it
is equally true, however, that where the dismissed employee's reinstatement would lead to a strained relation
between the employer and the employee or to an atmosphere of antipathy and antagonism, the exception to the
twin remedies of reinstatement and payment of backwages can be invoked and reinstatement, which might
become anathema to industrial peace, could be held back pending appeal. 43 Nevertheless, the Court is not
prepared to preempt the NLRC and conclude that the directive for reinstatement is of "dubious" character. 44 It can
be assumed that had petitioners waited for NLRC's resolution on the motion for reconsideration, the question on
the regularity in the issuance of the directive for reinstatement could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual question 45 well within the province of the
NLRC. Considering, nevertheless, that its findings are at odds with the Labor Arbiter, the Court sees it fit to dwell a
bit into the issue. 46
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the

selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal, and (4) the
power to control the employee's conduct, with the control test generally assuming primacy in the overall
consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise
thereof. It is not essential, in other words, for the employer to actually supervise the performance of duties of the
employee; it is enough that the former has the right to wield the power. 47
The NLRC, in the instant case, based its finding that there existed an employer-employee relationship between
petitioner bank and private respondent on these factual settings:
It was complainant's understanding with respondent Morales that he would be appointed and assigned to the
Legal Department as vice President with the same salary, privileges and benefits granted by the respondent bank
to its ranking senior officers. He was not hired as lawyer on a retainership basis but as an officer of the bank.
Thus, the complainant was given an appointment as Vice President, Legal Department, effective August 1, 1981,
with a monthly salary of P8,000.00, monthly allowance of P4,500.00, and the usual two months Christmas bonus
based on basic salary likewise enjoyed by the other officers of the bank.
Then, as part of the ongoing organization of the Legal Department, the position of General Counsel of the bank
was created and extended to the complainant. In addition to his duties as Vice President of the bank, the
complainant's duties and responsibilities were so defined as to prove that he was a bank officer working under the
supervision of the President and the Board of Directors of the respondent bank.
In his more than eight years employment with the respondent bank, the complainant was given the usual payslips
to evidence his monthly gross compensation. The respondent bank, as employer, withheld taxes due to the
Bureau of Internal Revenue from the complainant's salary as employee. Moreover, the bank enrolled the
complainant as its employee under the Social Security System and Medicare programs. The complainant
contributed to the bank Employees' Provident Fund.
When the respondent bank changed its payroll accounting system in September 1988 by appointing SGV & Co. to
handle it and Far East Bank & Trust Company to pay the salaries and other benefits of Equitable Banking
Corporation officers, the complainant was included as one of corporate officers. Specifically, that there were
eleven Far East Bank and Trust Company credit memos starting October 13, 1988 up to September 13, 1989
received by the complainant from FBTC crediting his salary and Christmas bonus to his account with FBTC per
instruction of the respondent bank.
Inasmuch as the complainant and the lawyers in the Legal Department were receiving salaries and other benefits
as other bank officers and employees, the attorney's fees, documentary and notarial fees earned in the exercise of
their profession as in-house lawyers were not given to or even shared with them, instead all were credited to the
income of the bank. In 1987 and 1988, the complainant and his subordinate lawyers were able to generate by way
of attorney's fees, documentary and notarial fees a total income of P973,028.00 for the bank('s) benefit. In turn,
the respondent bank shouldered the professional tax and Integrated Bar of the Philippines dues of the
complainant and his subordinate lawyers. Further proofs that there existed employer-employee relationship
between the respondent bank and the complainant are the following, to wit:
(1) Complainant's monthly attendance, like those of other bank officers, was recorded by the Chief Security Officer
and reported to the Office of the President with copy of the report furnished to the bank Personnel and HRD
Department.
(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering legal
services of lawyers to be retained by the respondent bank for its branches on periodical retainership basis.
(3) Complainant participated as part of management in annual Management Planning Conferences which started
in 1986 on objective-setting and long-range planning in response to the requirement of the rapidly changing
environment.
(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior officer of
the bank.
(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior officers
in its statements of financial condition holding the position of Vice President. These bank statements have been
distributed and circularized to the public, including bank clients and government entities.
(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central Bank after
his assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central Bank, he has been

required to update annually his biographical data.

48

It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of discretion in coming
up with its above findings. Just to the contrary, NLRC appears to have been rather exhaustive in its examination of
this particular question (existence or absence of an employer-employee relationship between the parties).
Substantial evidence, which is the quantum of evidence required to establish a fact in cases before administrative
and quasi-judicial bodies, connotes merely that amount of relevant evidence which a reasonable mind might
accept to be adequate in justifying a conclusion. 49
The rulings in Besa and Asis, cited by petitioners, could not be all that controlling in this instance. In both cases,
the question of whether or not the parties had an employer-employee relationship was not the focal point of
controversy. In Besa, the Court said:
Petitioner's reliance on the constitutional provision against removal without cause is misplaced. It is appropriate to
invoke it when an officer or employee in the civil service enjoying a fixed term is made to lose his position without
warrant or justification. It certainly finds no application when the duration of one's term depends on the will of the
appointing power. That is so where the position held is highly confidential in character. Such is the case of the
Chief Legal Counsel of respondent Philippine National Bank. That is our answer to the specific question before us.
Our decision is limited to the validity of the action taken by respondent Bank. We do not by any means intimate an
opinion as to the legal consequences attaching to an action similar in character taken by any other office or
agency of the government concerning a lawyer in its staff, especially one who was not employed precisely
because of the marked degree of confidence reposed in him, but rather because of his technical competence.
As far as the petitioner is concerned, however, it is our conclusion that he could not plausibly contend that there
was a removal in the constitutional sense as what did take place was a termination of official relation. Accepting as
he did the position of chief legal adviser, the essence of which is the utmost degree of confidence involving such
"close intimacy which insures freedom of intercourse without embarrassment or freedom from misgivings of
betrayals" whether of personal trust or official matters, he could not have been unaware that his term could be cut
short any time without giving rise to any alleged infringement of the above constitutional safeguard. There was no
removal which according to such a mandate is only allowable for cause. Hence the lack of persuasive character of
petitioner's plea. 50
And in Asis, the Court held:
The Deputy Minister found that the evidence satisfactorily established that the Central's suspension of the
petitioner's and others' monthly ration of gasoline and LPG, had been caused by unavoidable financial constraints;
that such a suspension, in line with its conservation and cost-saving policy, did not in truth effect any significant
diminution of said benefits, since the petitioner was nevertheless entitled to reimbursement of the actual amount of
gas consumed; that petitioner had encouraged his co-employees to file complaints against the Central over the
rations issue, and this, as well as his institution of his own actions, had created an atmosphere of enmity in the
Central, and caused the loss by the Central of that trust and confidence in him so essential in a lawyer-client
relationship as that theretofore existing between them; and that under the circumstances, petitioner's discharge as
the Central's Legal Counsel and Head of the Manpower & Services Department was justified. The Deputy
Minister's order of dismissal was however subsequently modified, at the petitioner's instance, by decreeing the
payment to the latter of separation pay equivalent to one month's salary for every year of service rendered. 51
It was, in fact, Hydro Resources which directly confronted the issue; there, the Court ruled:
A lawyer, like any other professional, may very well be an employee of a private corporation or even of the
government. It is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise treat them like its other officers and
employees At the same time, it may also contract with a law firm to act as outside counsel on a retainer basis. The
two classes of lawyers often work closely together but one group is made up of employees while the other is not. A
similar arrangement may exist as to doctors, nurses, dentists, public relations practitioners, and other
professionals. 52
The existence of an employer-employee relationship, between the bank and private respondent brings the case
within the coverage of the Labor Code. Under the Code, an employee may be validly dismissed if these requisites
are attendant: (1) the dismissal is grounded on any of the causes stated in Article 282 of Labor Code, and (2) the
employee has been notified in writing and given the opportunity to be heard and to defend himself as so required
by Section 2 and Section 5, Rule XIV, Book V, of the Implementing Rules of the Labor Code. 53

Article 282(c) of the Labor Code provides that "willful breach by the employee of the trust reposed in him by his
employer" is a cause for the termination of employment by an employer. Ordinary breach of trust will not suffice, it
must be willful and without justifiable excuse. 54 This ground must be founded on facts established by the employer
who must clearly and convincingly prove by substantial evidence 55 the facts and incidents upon which loss of
confidence in the employee may fairly be made to rest; otherwise, the dismissal will be rendered illegal. 56
Petitioners' stated loss of trust and confidence on private respondent was spawned by the complaints leveled
against him by the lawyers in his department. The letter-complaint signed by the nine lawyers read:
June 26, 1989
Mr. Manuel L. Morales
Chairman, Board of Directors
Equitable Banking Corporation
S i r:
With utmost respect, we have taken the liberty of seeking your intercession on the problems besetting the Legal
Department.
For a long time, we have kept silent, containing within us the abusive conduct and inefficiency of our department
head, Atty. Ricardo L. Sadac, if only to preserve cohesion among us. But we have reached the breaking point
where we could endure no more except to speak out. We realize the gravity of our action and its possible
repercussions but we only have ourselves to blame if we remained silent.
Atty. Sadac's insults to the lawyers which are totally uncalled for and made even in the presence of clients are
simply too much for a fellow lawyer. His outburst of temper on inconsequential matters have now become
commonplace in the department. His mismanagement, ineffectiveness as a head and indecisiveness on basic
legal questions have adversely affected the smooth operation of the department and the output of the lawyers. He
berates rather than inspires, delays rather than facilitates. Each lawyer's complaint are (sic) attached hereto
attached (sic) as Annexes "A", "A-1" to "A-8".
At present, we are disgruntled on how he runs the department and our morale is at its ebb. While our only desire
is to work under an auspicious environment and under an effective head, we could not do so because of the
General Counsel.
We, therefore, respectfully pray for an immediate change in the department leadership in order to pave the way for
a more effective system, a new image for the department, and restore professionalism and the dignity of the
lawyers.
Please accept our assurances that the interest of the bank is primordial to us as we pledge our total commitment
and unflinching loyalty to this institution.
Thank you. 57
Concededly, a wide latitude of discretion is given an employer in terminating the employment of managerial
employees on the ground of breach of trust and confidence. 58 In order to constitute a "just cause" for dismissal,
however, the act complained of must be related to the performance of the duties of the employee such as would
show him to be thereby unfit to continue working for the employer. 59 Here, the grievances of the lawyers, in main,
refer to what are perceived to be certain objectionable character traits of private respondent. Although petitioners
have charged private respondent with allegedly mishandling two cases in his long service with the bank, it is quite
apparent that private respondent would not have been asked to resign had it not been for the letter-complaint of
his associates in the Legal Department.
Confident that no employer-employee existed between the bank and private respondent, petitioners have put
aside the procedural requirements for terminating one's employment, i.e., (a) a notice apprising the employee of
the particular acts or omissions for which his dismissal is sought, and (b) another notice informing the employee of
the employer's decision to dismiss him. 60 Failure to comply with these requirements taints the dismissal with
illegality. This procedure is mandatory, any judgment reached by management without that compliance can be
considered void and inexistent. 61 While it is true that the essence of due process is simply an opportunity to be

heard or, as applied in administrative proceedings, an opportunity to explain one's side, 62 meetings in the nature
of consultation and conferences such as the case here, however, may not be valid substitutes for the proper
observance of notice and hearing. 63
Moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.
Exemplary damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner. 64
The Court has deliberated closely on this case and, after reviewing all the facts and circumstances heretofore
described, it is its considered view that petitioners have not been motivated by malice or bad faith nor have they
acted in wanton, oppressive or malevolent manner such as to warrant a judgment against them for moral and
exemplary damages. Malice or bad faith, the lesser evil of the two, the Court has once said, "implies a conscious
and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the
negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively operating with
furtive design or ill will." 65
It, too, then follows that the individual petitioners may not be held solidarily liable with the bank. In Santos vs.
NLRC, 66 the Court has explained the rule quite elaborately; thus:
A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities. Nevertheless, being a mere fiction of law,
peculiar situations or valid grounds can exist to warrant, albeit done sparingly, the disregard of its independent
being and the lifting of the corporate veil. As a rule, this situation might arise when a corporation is used to evade
a just and due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out similar other unjustifiable
aims or intentions, or as a subterfuge to commit injustice and so circumvent the law. In Tramat Mercantile, Inc., vs.
Court of Appeals [238 SCRA 14, 19], the Court has collated the settled instances when, without necessarily
piercing the veil of corporate fiction, personal civil liability can also be said to lawfully attach to a corporate director,
trustee or officer; to wit: When
(1) He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing
its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
(2) He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto;
(3) He agrees to hold himself personally and solidarily liable with the corporation; or
(4) He is made, by a specific provision of law, to personally answer for his corporate action.
The case of petitioner is way off these exceptional instances. It is not even shown that petitioner has had a direct
hand in the dismissal of private respondent enough to attribute to him (petitioner) a patently unlawful act while
acting for the corporation. Neither can Article 289 of the Labor Code be applied since this law specifically refers
only to the imposition of penalties under the Code. . . . .
It is true, there were various cases when corporate officers were themselves held by the Court to be personally
accountable for the payment of wages and money claims to its employees. In A.C. Ransom Labor Union-CCLU
vs. NLRC [142 SCRA 269] for instance, the Court ruled that under the Minimum Wage Law, the responsible officer
of an employer corporation could be held personally liable for nonpayment of backwages for "(i)f the policy of the
law were otherwise, the corporation employer (would) have devious ways for evading payment of back wages." In
the absence of a clear identification of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC [182 SCRA 353]
in holding personally liable the vice-president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed, for the latter's claim for unpaid wages.
A review of the above exceptional cases would readily disclose the attendance of facts and circumstances that
could rightly sanction personal liability on the part of the company officer. In A.C. Ransom, the corporate entity
was a family corporation and execution against it could not be implemented because of the disposition posthaste
of its leviable assets evidently in order to evade its just and due obligations. The doctrine of "piercing the veil of
corporate fiction" was thus clearly appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the company. There were
incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in bad faith, in the

easing out from the company of one of the brothers by the other.
The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs. National Labor
Relations Commission [127 SCRA 390]; thus:
We come now to the personal liability of petitioner, Sunio, who was made jointly and severally responsible with
petitioner company and CIPI for the payment of the backwages of private respondents. This is reversible error.
The Assistant Regional Director's Decision failed to disclose the reason why he was made personally liable.
Respondents, however, alleged as grounds thereof, his the being owner of one-half (1/2) interest of said
corporation, and his alleged arbitrary dismissal of private respondents.
Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner corporation
There appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of
private respondents. His act, therefore, was within the scope of his authority and was a corporate act.
It is basic that a corporation is invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality. Petitioner Sunio, therefore, should not have been
made personally answerable for the payment of private respondents' back salaries.
The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC [183 SCRA 644]; however, it
should be clear from our recent pronouncement in Mam Realty Development Corporation and Manuel Centeno vs.
NLRC [244 SCRA 797] that the Sunio doctrine still prevails. 67
For having violated private respondent's right to due process private respondent shall, considering the attendant
circumstances particularly his repeated, but unheeded, request for a hearing, be entitled to an amount of
P5,000.00.
The allegation that private respondent was guilty of forum-shopping deserves scant consideration. Suffice it said
that, for forum-shopping to exist, both actions should involve a common transaction with essentially the same facts
and circumstances and raise identical causes of action, subject matter and issues. 68 Certainly, the filing by private
respondent of a criminal action for libel during the pendency of this illegal dismissal case could not constitute
forum-shopping.
The controversy spawning this case has generated not too little personal animosities. 69 Reinstatement, which is
the consequence of illegal dismissal, has markedly been rendered undesirable. Private respondent shall, instead,
be entitled to backwages from the time of his dismissal until reaching sixty (60) years of age (1995) 70 and,
thereupon, to retirement benefits in accordance with Article 287 of the Labor Code and Section 14, 71 Rule 1, Book
VI, of the Implementing Rules of the Labor Code. 72
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following MODIFICATIONS:
That private respondent shall be entitled to backwages from termination of employment until turning sixty (60)
years of age (in 1995) and, thereupon, to retirement benefits in accordance with law; that private respondent shall
be paid an additional amount of P5,000.00; that the award of moral and exemplary damages are deleted; and that
the liability herein pronounced shall be due from petitioner bank alone, the other petitioners being absolved from
solidary liability. No costs.
SO ORDERED.

G.R. No. 111501 March 5, 1996

PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO LUIS,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAG-GAWA,
(KILUSAN)-TUCP, PHILIPPINE XEROX EMPLOYEES UNION-KILUSAN and PEDRO GARADO, respondents.
MENDOZA, J.:p
This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox
Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him
reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding private respondent to be
an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox.
The question raised in this case is whether private respondent is an employee of Fuji Xerox (as the NLRC found)
or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that private
respondent is an employee of Fuji Xerox and accordingly dismiss the petition for review of Fuji Xerox.
The following are the facts.
On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to
operate copier machines of Fuji Xerox as part of the latter's "Xerox Copier Project" in its sales offices. Private
respondent Pedro Garado was assigned as key operator at Fuji Xerox's branch. at Buendia, Makati, Metro Manila,
in February of 1980.

(5) Skillpower, Inc. is a highly-capitalized business venture.

The contentions are without merit.
Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later
merely assigned to it (petitioner) . It is undisputed, however, that since 1980, 1 when Garado was first assigned to
work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984, he was already a
member of the union which petitioned the company for his regularization. 2 From 1980 to 1984 he worked
exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in
the latter's Xerox Copier Project. 3
Petitioners claim that Skillpower, Inc. has other clients to whom it provided "temporary" services. That, however, is
irrelevant. What is important is that once employed, Garado was never assigned to any other client of Skillpower,
Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only "temporary" services,
Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven
(7) years, from 1977 to 1984.

In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in
March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the
spoilage, he tried to talk a service technician of Fuji Xerox into stopping the meter of the machine.

On January 1, 1983, private respondent signed a contract entitled "Appointment as Contract Worker," in which it
was stated that private respondent's status was that of a contract worker for a definite period from January 1, 1983
to June 30, 1983. As such, private respondent's employment was considered temporary, to terminate
automatically six (6) months afterwards, without necessity of any notice and without entitling private respondent to
separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower,
Inc., and not of the client to which he was assigned. Therefore, the termination of the contract or any renewal or
extension thereof did not entitle him to become an employee of the client and the latter was not under any
obligation to appoint him as such, "notwithstanding the total duration of the contract or any extension or renewal
thereof."

The technician refused Garado's request, but this incident came to the knowledge of Fuji Xerox which, on May 31,
1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain.
In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal.

This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private
respondent by employing workers under six-month contracts which are later extended indefinitely through
renewals. As this Court held in the Philippine Bank of Communications v. NLRC: 4

The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made
to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which
exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in
machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the
Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc.,
and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed
Garado's complaint.

It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to
permit employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep
their employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs.
Article 106 of the Labor Code is precisely designed to prevent such a result.

On the other hand, the NLRC found Garado to be infact an employee of petitioner Fuji Xerox and by it to have
been illegally dismissed. The NLRC found that although Garado's request was wrongful, dismissal would be a
disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact was
that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it was
Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC
found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that
Skillpower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that Skillpower, Inc. was a laboronly contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of the
agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered:
WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant
Pedro Garado to his former position as key operator with three (3) years backwages, without qualification or
reduction whatsoever . . . . Except as herein above MODIFIED, the appealed decision is hereby Affirmed.
Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is
its employee for the following reasons:
(1) Garado was recruited by Skillpower, Inc.;
(2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox;
(3) Garado's salaries and benefits were paid directly by Skillpower, Inc.;
(4) Garado worked under the control of Skillpower, Inc.; and

Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners' xerox
machine, is not directly related nor necessary to the business of selling and leasing copier machines of petitioner.
Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its business.
What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to
them. As such, the project is no different from other services which can legally be contracted out, such as security
and janitorial services. Petitioners contend that the copier service can be considered as part of their
"housekeeping" tasks which can be let to independent contractors. 5
We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes
goodwill for the company . It may not generate income for the company but there are activities which a company
may find necessary to engage in because they ultimately redound to its benefit. Operating the company's copiers
at its branches advertises the quality of their products and promotes the company's reputation and public image. It
also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for
profit the copying service is not intended either to be "promotional," as, indeed, petitioner charged a fee for the
copies made.
It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be
considered "housekeeping activities," the one performing the task is a job contractor. The determination of the
existence of an employer-employee relationship is defined by law according to the facts of each case, regardless
of the nature of the activities involved.
Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege
that the salaries paid to Garado, as well as his employment records, vouchers and loanchecks from the SSS were

coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to Skillpower, Inc.
It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should
not be dismissed for the spoilage in Fuji Xerox's Buendia branch and suspended him pending the result of the
investigation. According to petitioners, although they conducted an administrative investigation, the purpose was
only to determine the complicity of their own employees in the incident, if any, and any criminal liability of private
respondent.

had investments in the form of tools, equipment, machineries and work premises. But the Court in that case
considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services
(radio/telex operator and janitor) to the employer; that in another case 8 the Court had already found that the BCC
was an independent contractor; that BCC retained control over the employees and the employer was actually just
concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not
subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These
features of that case make it distinguishable from the present one.

This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the
company, to the union president, Nick Macaraig. The first letter, dated July 6, 1983, stated:
This has reference to your various letters dated today on administrative case concerning Messrs. Crisostomo
Cruz, Pedro Garado and Ms. Evelyn Abenes.

Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was
in the business of providing. Although in the Neri case the telex machine operated by the employee belonged to
the employer, the service was deemed permissible because it was specific and technical. This cannot be said of
the service rendered by private respondent Garado.

In connection with the above and in the case likewise of Mr. Dionisio Guyala, please be advised that the
proceedings against them are being carried out under the terms, and in accordance with the provisions of our
Policy and Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1, 1982,
and not under the Grievance Machinery under our CBA.

The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job contracting when the
following conditions are fulfilled:
(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the form of tools equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.

Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is
premature. If we have allowed the Union to participate in our Investigation and Administrative panels, it is only a
concession on management's part in accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on
the investigation, the Personnel/Administrative Department may consult the Union whenever necessary.

Otherwise, according to Art. 106 of the Labor code,

We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing
cases and should you find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit
subject for grievance by the Union itself under the terms of our CBA.
Accordingly, we are proceeding with our investigations on the administrative charges with or without your presence
or that of the respondents if it is the latter's preference, as in the case of Crisostomo Cruz, to ignore the same.
(Emphasis ours)
The second letter, dated July 13, 1983, 6 read:
You obviously persist in pursuing the misconception that our allowing your presence in the administrative
proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play. We
can only reiterate our statement in our letter of July 6 that we were implementing Policy and Procedures on
Termination dated October 1, 1982 and that your presence in helping bolster the defense for the respondents was
only with our forbearance in the spirit of cooperation in order to better ferret out the truth.
The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of
Management, something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is
limited to settling disputes and misunderstanding as to interpretation, application, or violation of any provisions of
the CBA agreement . . . As likewise pointed out in our letter of July 6 recourse to Grievance may possibly be
resorted to if in the Union's opinion a penalty imposed upon a respondent Union member is discriminating to the
member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to the NLRC, as in
similar cases in the past. (Emphasis ours)
These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any
doubt that Fuji Xerox exercised disciplinary authority over Garado and that Skillpower, Inc. issued the order of
dismissal merely in obedience to the decision of petitioner.
Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an
"independent employer" with the Securities and Exchange Commission as well as the Department of Labor and
Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding P5
million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own and a
pool of 25 clerks assigned to clients on a temporary basis.
Petitioners cite the case of Neri v. NLRC, 7 in which it was held that the Building Care Corporation (BCC) was an
independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its
business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for
which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the
public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply
manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his business," in the
Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being
contracted to render. One who does not have an independent business for undertaking the job contracted for is
just an agent of the employer.
Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is an
independent contractor and that the workers hired by it "shall not, in any manner and under any circumstances, be
considered employees of [the] Company, and that the Company has no control or supervision whatsoever over the
conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the
Contractor's obligations under this AGREEMENT."
In Tabas v. California Manufacturing Company, Inc., 9 this Court held on facts similar to those in case at bar:
There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor
in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding
the provision of the contract that it is "an independent contractor." The nature of one's business is not determined
by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The
bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided
California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners
had been made to perform activities "which are not directly related to the general business of manufacturing,"
California's purported "principal operation activity." The petitioners had been charged with "merchandising [sic]
promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and
occasional [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not,

then, as if Livi had served as its (California's promotions or sales arm or agents, or otherwise, rendered a piece of
work it (California) could not have itself done; Livi as a placement agency, had simply supplied it with the
manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and
equipment.
xxx xxx xxx
The fact that the petitioners have allegedly admitted being Livi's "direct employees" in their complaints is nothing
conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been
imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to
case and the decree of law, and not by declaration of parties.
Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of
discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private
respondent.
ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.

G.R. No. 102199 January 28, 1997

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents.

P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total expected
commission would amount to P354,796.09. From that figure at a 15% compromise settlement this would mean
P53,219.41 due him to settle his claim.

PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or
tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor
Relations Commission have no jurisdiction to entertain and rule on money claims where no employer-employee
relations is involved. Thus, any such award rendered without jurisdiction is a nullity.

Private respondent, however, was paid only the amount of P35,000.00.

This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor
Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled
"Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which
ordered payment of the amount of P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner
AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2
B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for
AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and regulations which it
may from time to time, revise, modify or cancel to serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation
or residence of military personnel. He is free to solicit in the area for which he/she is licensed and as authoriied,
provided however, that AFPMBAI may from time to time, assign him a specific area of responsibility and a
production quota on a case to case basis.
xxx xxx xxx
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by
AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the
applicant's commission schedules hereto attached.
xxx xxx xxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby
deemed an independent contractor.
As compensation, he received commissions based on the following percentages of the premiums paid: 3
"30% of premium paid within the first year;
10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up to the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling
insurance for another life insurance company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24)
months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by
Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that private
respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid to him.
Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through
Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence,
believing Concepcion's computations, private respondent signed a quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his
check, he discovered from a document (account summary) attached to said check that his total commissions for
the 24 months actually amounted to P354,796.09. Said document stated: 4
6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983 grosses

On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner
praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public
Assistance and Information Division, Office of the Insurance Commissioner, advised private respondent that it was
the Department of Labor and Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1)
commission for 2 years from termination of employment equivalent to 30% of premiums remitted during
employment; (2) P354,796.00 as commission earned from renewals and old business generated since 1983; (3)
P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990,
the dispositive portion of which reads: 5
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the dismissal
of the complainant as just and valid, and consequently, his claim for separation pay is denied. On his money claim,
the respondent company is hereby ordered to pay complainant the sum of P319,796.00 plus attorney's fees in the
amount of P31,976.60.
All other claims of the complainant are dismissed for want of merit.
The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a
specific area of responsibility and a production quota, and read it as signalling the existence of employeremployee relationship between petitioner and private respondent.
On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter. In the
assailed Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and
ruled: 7
WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and
the decision appealed from affirmed
SO ORDERED.
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor
arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an
employer-employee relationship between petitioner and private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employeremployee relationship between private respondent and itself. Hence, respondent commission gravely abused its
discretion when it held that the labor arbiter had jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact
and that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be accorded
not only respect but even finality when supported by substantial evidence. 8 The determinative factor in such
finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind
this Court.
Respondent Commission concurred with the labor arbiter's findings that: 9

x x x The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of
the respondent company. Under the Sales Agents Agreement, the complainant was required to solicit exclusively
for the respondent company, and he was bound by the company policies, memo circulars, rules and regulations
which were issued from time to time. By such requirement to follow strictly management policies, orders, circulars,
rules and regulations, it only shows that the respondent had control or reserved the right to control the
complainant's work as solicitor. Complainant was not an independent contractor as he did not carry on an
independent business other than that of the company's . . .
To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may
assign private respondent a specific area of responsibility and a production quota. From there, it concluded that
apparently there is that exercise of control by the employer which is the most important element in determining
employer- employee relationship. 10
We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court
has applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers
the following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the
power to control, the last being the most important element. 11
The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control.
Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business
exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No.
2-81 12 and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance
Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect
the public and to enable insurance companies to exercise exclusive supervision over their agents in their
solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance
Commission, and not from an intention by petitioner to establish control over the method and manner by which
private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship
between the parties, nor does it necessarily imbue such relationship with the quality of control envisioned by the
law.
So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations
issued from time to time is also not indicative of control. In its Reply to Complainant's Position Paper, 13 petitioner
alleges that the policies, memo/circulars, and rules and regulations referred to in provision B(1) of the Sales
Agent's Agreement are only those pertaining to payment of agents' accountabilities, availment by sales agents of
cash advances for sorties, circulars on incentives and awards to be given based on production, and other matters
concerning the selling of insurance, in accordance with the rules promulgated by the Insurance Commission.
According to the petitioner, insurance solicitors are never affected or covered by the rules and regulations
concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit
increases, promotions, absenteeism/attendance, leaves of absence, management-union matters, employee
benefits and the like. Since private respondent failed to rebut these allegations, the same are deemed admitted, or
at least proven, thereby leaving nothing to support the respondent Commission's conclusion that the foregoing
elements signified an employment relationship between the parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise
of control over an employee. First of all, the place of work in the business of soliciting insurance does not figure
prominently in the equation. And more significantly, private respondent failed to rebut petitioner's allegation that it
had never issued him any territorial assignment at all. Obviously, this Court cannot draw the same inference from
this feature as did the respondent Commission.
To restate, the significant factor in determining the relationship of the parties is the presence or absence of
supervisory authority to control the method and the details of performance of the service being rendered, and the
degree to which the principal may intervene to exercise such control. The presence of such power of control is
indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In
other words, the test to determine the existence of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his own methods and without being subject to
the control of the employer except only as to the result of the work. 14 Such is exactly the nature of the relationship
between petitioner and private respondent.
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to

the services being rendered may be accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held
that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise
affected with public interest, as is the business of insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and insured but also to the internal affairs of the
insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurande company
to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the
law and what it requires or prohibits. . . . None of these really invades the agent's contractual prerogative to adopt
his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to
establish an employer-employee relationship between him and the company. 15
Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell
insurance at any time as he was not subject to definite hours or conditions of work and in turn was compensated
according to the result of his efforts. By the nature of the business of soliciting insurance, agents are normally left
free to devise ways and means of persuading people to take out insurance. There is no prohibition, as contended
by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. As petitioner
explains:
(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered time to
pursue his business. He did not have to punch in and punch out the bundy clock as he was not required to report
to the (petitioner's) office regularly. He was not covered by any employee policies or regulations and not subject to
the disciplinary action of management on the basis of the Employee Code of Conduct. He could go out and sell
insurance at his own chosen time. He was entirely left to his own choices of areas or territories, with no definite,
much less supervised, time schedule.
(Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of Control
and Supervision over his performance except as to the payment of commission the amount of which entirely
depends on the sole efforts of (private respondent). He was free to engage in other occupation or practice other
profession for as long as he did not commit any violation of the ethical standards prescribed in the Sales Agent's
Agreement. 16
Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be
disapproved was only the result of the work, and not the means by which it was accomplished.
The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct
in and mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had
been absent in this situation. Thus, the Court is constrained to rule that no employment relationship had ever
existed between the parties.
Second Issue: Jurisdiction of Respondent
Commission & Labor Arbiter
Under the contract invoked, private respondent had never been petitioner's employee, but only its commission
agent. As an independent contractor, his claim for unpaid commission should have been litigated in an ordinary
civil action. 17
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. 18 The
unifying element running through paragraphs (1) (6) of said provision is the consistent reference to cases or
disputes arising out of or in connection with an employer-employee relationship. Prior to its amendment by Batas
Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all other cases arising from
employer-employee relation unless expressly excluded by this Code." 19 Without this critical element of

employment relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a
dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have assumed jurisdiction and
adjudicated the claim. Likewise, the respondent Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The
doctrine of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot
confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action. 20 Moreover,
in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter 21 and respondent
Commission. 22
It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal
without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating
from it have no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a lawless thing which can
be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 24
The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid
commission. Be that as it may, this ruling is without prejudice to private respondent's right to file a suit for
collection of unpaid commissions against petitioner with the proper forum and within the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.
SO ORDERED.

G.R. No. L-21278

December 27, 1966

FEATI UNIVERSITY, petitioner,

vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and FEATI UNIVERSITY
FACULTY CLUB-PAFLU, respondents.
---------------------------------------G.R. No. L-21462
December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
---------------------------------------G.R. No. L-21500
December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
Rafael Dinglasan for petitioner.Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed to
file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU hereinafter referred
to as Faculty Club wrote a letter to Mrs. Victoria L. Araneta, President of petitioner Feati University
hereinafter referred to as University informing her of the organization of the Faculty Club into a registered labor
union. The Faculty Club is composed of members who are professors and/or instructors of the University. On
January 22, 1963, the President of the Faculty Club sent another letter containing twenty-six demands that have
connection with the employment of the members of the Faculty Club by the University, and requesting an answer
within ten days from receipt thereof. The President of the University answered the two letters, requesting that she
be given at least thirty days to study thoroughly the different phases of the demands. Meanwhile counsel for the
University, to whom the demands were referred, wrote a letter to the President of the Faculty Club demanding
proof of its majority status and designation as a bargaining representative. On February 1, 1963, the President of
the Faculty Club again wrote the President of the University rejecting the latter's request for extension of time, and
on the same day he filed a notice of strike with the Bureau of Labor alleging as reason therefor the refusal of the
University to bargain collectively. The parties were called to conferences at the Conciliation Division of the Bureau
of Labor but efforts to conciliate them failed. On February 18, 1963, the members of the Faculty Club declared a
strike and established picket lines in the premises of the University, resulting in the disruption of classes in the
University. Despite further efforts of the officials from the Department of Labor to effect a settlement of the
differences between the management of the University and the striking faculty members no satisfactory agreement
was arrived at. On March 21, 1963, the President of the Philippines certified to the Court of Industrial Relations the
dispute between the management of the University and the Faculty Club pursuant to the provisions of Section 10
of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and certain incidents related to said
dispute, various cases were filed with the Court of Industrial Relations hereinafter referred to as CIR. The three
cases now before this Court stemmed from those cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of
preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary
injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos.
41-IPA, 1183-MC, and V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the
orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No.
1183-MC, and the order dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge
be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of
P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR, until further order from this
Court, "to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the
Court of Industrial Relations)."1 On December 4, 1963, this Court ordered the injunction bond increased to

P100,000.00; but on January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the
bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30 involved in the Case G.R. No. L21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty Club.
As we have stated, the dispute between the University and the Faculty Club was certified on March 21, 1963 by
the President of the Philippines to the CIR. On the strength of the presidential certification, respondent Judge
Bautista set the case for hearing on March 23, 1963. During the hearing, the Judge endeavored to reconcile the
part and it was agreed upon that the striking faculty members would return to work and the University would
readmit them under a status quo arrangement. On that very same day, however, the University, thru counsel filed
a motion to dismiss the case upon the ground that the CIR has no jurisdiction over the case, because (1) the
Industrial Peace Act is not applicable to the University, it being an educational institution, nor to the members of
the Faculty Club, they being independent contractors; and (2) the presidential certification is violative of Section 10
of the Industrial Peace Act, as the University is not an industrial establishment and there was no industrial dispute
which could be certified to the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion
to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had
acquired jurisdiction over the case by virtue of the presidential certification. In the same order, the respondent
Judge, believing that the dispute could not be decided promptly, ordered the strikers to return immediately to work
and the University to take them back under the last terms and conditions existing before the dispute arose, as per
agreement had during the hearing on March 23, 1963; and likewise enjoined the University, pending adjudication
of the case, from dismissing any employee or laborer without previous authorization from the CIR. The University
filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and at the
same time asking that the motion for reconsideration be first heard by the CIR en banc. Without the motion for
reconsideration having been acted upon by the CIR en banc, respondent Judge set the case for hearing on the
merits for May 8, 1963. The University moved for the cancellation of said hearing upon the ground that the court
en banc should first hear the motion for reconsideration and resolve the issues raised therein before the case is
heard on the merits. This motion for cancellation of the hearing was denied. The respondent Judge, however,
cancelled the scheduled hearing when counsel for the University manifested that he would take up before the
Supreme Court, by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the
issues raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order
of March 30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had
employed professors and/or instructors to take the places of those professors and/or instructors who had struck.
On April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of court
certain parties, alleging that the University refused to accept back to work the returning strikers, in violation of the
return-to-work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the petition for
contempt, denying the allegations of the Faculty Club and alleging by way of special defense that there was still
the motion for reconsideration of the order of March 30, 1963 which had not yet been acted upon by the CIR en
banc. On April 6, 1963, the respondent Judge issued an order stating that "said replacements are hereby warned
and cautioned, for the time being, not to disturb nor in any manner commit any act tending to disrupt the effectivity
of the order of March 30,1963, pending the final resolution of the same." 2 On April 8, 1963, there placing
professors and/or instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the
order of respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that are sought to be
annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963
before the CIR, praying that it be certified as the sole and exclusive bargaining representative of all the employees
of the University. The University filed an opposition to the petition for certification election and at the same time a
motion to dismiss said petition, raising the very same issues raised in Case No. 41-IPA, claiming that the petition
did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of the individual
contracts of the professors, instructors, and teachers, who are members of the Faculty Club, would expire on
March 25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the petition because the Industrial
Peace Act is not applicable to the members of the Faculty Club nor to the University. This case was assigned to
Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss, however, the

Faculty Club filed on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No.
41-IPA) had already been certified by the President to the CIR and the issues raised in Case No. 1183-MC were
absorbed by Case No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case No.
1183-MC were separate and distinct from the issues raised in Case No. 41-IPA; that the questions of recognition
and majority status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could not
exercise its power of compulsory arbitration unless the legal issue regarding the existence of employer-employee
relationship was first resolved. The University prayed that the motion of the Faculty Club to withdraw the petition
for certification election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar Villanueva,
finding that the reasons stated by the Faculty Club in the motion to withdraw were well taken, on April 6, 1963,
issued an order granting the withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that
order of April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders
sought to be annulled in the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials of
the University. The Faculty Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint
docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive VicePresident Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of the University, with indirect
contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the order dated
March 30, 1963. Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent Judge
Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the above named officials
of the University so that they may be dealt with in accordance with law, and the same time fixed the bond for their
release at P500.00 each. This order of April 29, 1963 is also one of the orders sought to be annulled in the case,
G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in
Case G.R. No. L-21278, now before Us, is that respondent Judge Jose S. Bautista acted without, or in excess of,
jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR
Cases Nos. 41-IPA 1183-MC and V-30. Let it be noted that when the petition for certiorari and prohibition with
preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA,
1183-MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed by the
University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary
injunction, admitting some allegations contained in the petition and denying others, and alleging special defenses
which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No. 41IPA by virtue of the presidential certification, so that it had jurisdiction to issue the questioned orders in said Case
No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer and
to the members of the Faculty Club as employees who are affiliated with a duly registered labor union, so that the
Court of Industrial Relations had jurisdiction to take cognizance of Cases Nos. 1183-MC and V-30 and to issue the
questioned orders in those two cases; and (3) that the petition for certiorari and prohibition with preliminary
injunction was prematurely filed because the orders of the CIR sought to be annulled were still the subjects of
pending motions for reconsideration before the CIR en banc when said petition for certiorari and prohibition with
preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC relates
to a petition for certification election filed by the Faculty Club as a labor union, praying that it be certified as the
sole and exclusive bargaining representative of all employees of the University. This petition was opposed by the
University, and at the same time it filed a motion to dismiss said petition. But before Judge Baltazar Villanueva
could act on the petition for certification election and the motion to dismiss the same, Faculty Club filed a motion to
withdraw said petition upon the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41IPA which was certified by the President of the Philippines. Judge Baltazar Villanueva, by order April 6, 1963,
granted the motion to withdraw. The University filed a motion for reconsideration of that order of April 6, 1963 by
the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition for
certiorari and prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As
earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963,
ordering respondent Judge Bautista, until further order from this Court, to desist and refrain from further
proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L-21278,
the CIR en banc issued a resolution denying the motion for reconsideration of the order of April 6, 1963 in Case
No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the
resolution of the CIR en banc, dated June 5, 1963, denying the motion for reconsideration of the order of April 6,
1963 in Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the
University alleges (1) that the resolution of the Court of Industrial Relations of June 5, 1963 was null and void
because it was issued in violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the
issues of employer-employee relationship, the alleged status as a labor union, majority representation and
designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first
in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA and therefore the motion to
withdraw the petition for certification election should not have been granted upon the ground that the issues in the
first case have been absorbed in the second case; and (3) the lower court acted without or in excess of jurisdiction
in taking cognizance of the petition for certification election and that the same should have been dismissed instead
of having been ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC and the
order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered
to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari; and
specially alleging that the lower court's order granting the withdrawal of the petition for certification election was in
accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of the writ of
preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction was issued against Judge
Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge Baltazar Villanueva
who was the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to the
strike staged by the members of the Faculty Club and the dispute was certified by the President of the Philippines
to the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction over
the case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying the motion to dismiss and
declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired
jurisdiction over the case by virtue of the presidential certification; and in that same order Judge Bautista ordered
the strikers to return to work and the University to take them back under the last terms and conditions existing
before the dispute arose; and enjoined the University from dismissing any employee or laborer without previous
authority from the court. On April 1, 1963, the University filed a motion for reconsideration of the order of March
30, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the
petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10,
1963. As we have already stated, this Court in said case G.R. No. L-21278, issued a writ of preliminary injunction
on May 10, 1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to desist and
refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial
Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but
actually received and stamped at the Office of the Clerk of the CIR on June 28, 1963, denying the motion for
reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the
resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but actually received by said petitioner
on July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This
petition was docketed as G.R. No. L-21500. In its petition for certiorari the University alleges (1) that the resolution
of the CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is
null and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No.
L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of Case No. 41-IPA
and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the
certification made by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is
violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective

bargaining purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace
Act, and consequently it has no right to strike and picket on the ground of petitioner's alleged refusal to bargain
collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5)
that the return-to-work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings in
Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963 be
revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on
the ground that the petition being filed by way of an appeal from the orders of the Court of Industrial Relations
denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders
appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and
L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when the
cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these
three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its claim that the Court of
Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and
V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is
an educational institution and not an industrial establishment and hence not an "employer" in contemplation of
said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are
independent contractors and, therefore, not employees within the purview of the said Act.
In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875,
the University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan.
29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs.
Philippine Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et
al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern
University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent
thereto, and We find that they do not sustain the contention of the University. It is true that this Court has ruled that
certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion
College, and other juridical entities, like the Boy Scouts of the Philippines and Manila Sanitarium, are beyond the
purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no jurisdiction to take
cognizance of charges of unfair labor practice filed against them, but it is nonetheless true that the principal
reason of this Court in ruling in those cases that those institutions are excluded from the operation of Republic Act
875 is that those entities are not organized, maintained and operated for profit and do not declare dividends to
stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L12222, May 28, 1958, is very pertinent. We quote a portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and
managed by a "religious non-stock corporation duly organized and existing under the laws of the Philippines." It
was organized not for profit or gain or division of the dividends among its stockholders, but solely for religious and
educational purposes. It likewise appears that the Philippine Association of College and University Professors,
respondent herein, is a non-stock association composed of professors and teachers in different colleges and
universities and that since its organization two years ago, the university has adopted a hostile attitude to its
formation and has tried to discriminate, harass and intimidate its members for which reason the association and
the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of
unfair labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial
Relations over the controversy on the following grounds:
"(a) That complainants therein being college and/or university professors were not "industrial" laborers or
employees, and the Philippine Association of College and University Professors being composed of persons
engaged in the teaching profession, is not and cannot be a legitimate labor organization within the meaning of the
laws creating the Court of Industrial Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an institution established for the purpose of gain

or division of profits, and consequently, it is not an "industrial" enterprise and the members of its teaching staff are
not engaged in "industrial" employment (U.S.T. Hospital Employees Association vs. Sto. Tomas University
Hospital, G.R. No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial Relations and National
Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between therein complainants and respondent is not
an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction, not only on the parties but also
over the subject matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an institution established for profit or gain,
nor an industrial enterprise, but one established exclusively for educational purposes, can it be said that its
relation with its professors is one of employer and employee that comes under the jurisdiction of the Court of
Industrial Relations? In other words, do the provisions of the Magna Carta on unfair labor practice apply to the
relation between petitioner and members of respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091,
promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered the query in the
negative in the following wise:
"The main issue involved in the present case is whether or not a charitable institution or one organized not for
profit but for more elevated purposes, charitable, humanitarian, etc., like the Boy Scouts of the Philippines, is
included in the definition of "employer" contained in Republic Act 875, and whether the employees of said
institution fall under the definition of "employee" also contained in the same Republic Act. If they are included, then
any act which may be considered unfair labor practice, within the meaning of said Republic Act, would come under
the jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act,
particularly, its definitions of employer and employee, then the Industrial Court would have no jurisdiction at all.
xxx
xxx
xxx
"On the basis of the foregoing considerations, there is every reason to believe that our labor legislation from
Commonwealth Act No. 103, creating the Court of Industrial Relations, down through the Eight-Hour Labor Law, to
the Industrial Peace Act, was intended by the Legislature to apply only to industrial employment and to govern the
relations between employers engaged in industry and occupations for purposes of profit and gain, and their
industrial employees, but not to organizations and entities which are organized, operated and maintained not for
profit or gain, but for elevated and lofty purposes, such as, charity, social service, education and instruction,
hospital and medical service, the encouragement and promotion of character, patriotism and kindred virtues in
youth of the nation, etc.
"In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof regarding labor
disputes and unfair labor practice, does not apply to the Boy Scouts of the Philippines, and consequently, the
Court of Industrial Relations had no jurisdiction to entertain and decide the action or petition filed by respondent
Araos. Wherefore, the appealed decision and resolution of the CIR are hereby set aside, with costs against
respondent."
There being a close analogy between the relation and facts involved in the two cases, we cannot but conclude that
the Court of Industrial Relations has no jurisdiction to entertain the complaint for unfair labor practice lodged by
respondent association against petitioner and, therefore, we hereby set aside the order and resolution subject to
the present petition, with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et al.,
G.R. No. L-13748, October 30, 1959, where this Court ruled that:
In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry organized
for profit but an institution of learning devoted exclusively to the education of the youth. The Court of First Instance
of Manila in its decision in Civil Case No. 28870, which has long become final and consequently the settled law in
the case, found as established by the evidence adduced by the parties therein (herein petitioner and respondent
labor union) that while the University collects fees from its students, all its income is used for the improvement and
enlargement of the institution. The University declares no dividend, and the members of the corporation who
founded it, as ordained in its articles of incorporation, receive no material compensation for the time and sacrifice
they render to the University and its students. The respondent union itself in a case before the Industrial Court

(Case No. 314-MC) has averred that "the University of Santo Tomas, like the San Beda College, is an educational
institution operated not for profit but for the sole purpose of educating young men." (See Annex "B" to petitioner's
motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo Tomas is not a
corporation created for profit but an educational institution and therefore not an industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court repeated
the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court committed an error in holding that it has
jurisdiction to act in this case even if it involves unfair labor practice considering that the La Consolacion College is
not a business enterprise but an educational institution not organized for profit.
If the claim that petitioner is an educational institution not operated for profit is true, which apparently is the case,
because the very court a quo found that it has no stockholder, nor capital . . . then we are of the opinion that the
same does not come under the jurisdiction of the Court of Industrial Relations in view of the ruling in the case of
Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29, 1958.
It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La Consolacion
College, cited above, all involve charges of unfair labor practice under Republic Act No. 875, and the uniform
rulings of this Court are that the Court of Industrial Relations has no jurisdiction over the charges because said Act
does not apply to educational institutions that are not operated or maintained for profit and do not declare
dividends. On the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31,
1962, this Court upheld the decision of the Court of Industrial Relations finding the Far Eastern University, also an
educational institution, guilty of unfair labor practice. Among the findings of fact in said case was that the Far
Eastern University made profits from the school year 1952-1953 to 1958-1959. In affirming the decision of the
lower court, this Court had thereby ratified the ruling of the Court of Industrial Relations which applied the
Industrial Peace Act to educational institutions that are organized, operated and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of San
Agustin, the University of Sto. Tomas, and La Consolacion College, this Court was not unanimous in the view that
the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or non-profit
organizations which include educational institutions not operated for profit. There are members of this Court
who hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities the only
exception being the Government, including any political subdivision or instrumentality thereof, in so far as
governmental functions are concerned. However, in the Far Eastern University case this Court is unanimous in
supporting the view that an educational institution that is operated for profit comes within the scope of the
Industrial Peace Act. We consider it a settled doctrine of this Court, therefore, that the Industrial Peace Act is
applicable to any organization or entity whatever may be its purpose when it was created that is operated for
profit or gain.
Does the University operate as an educational institution for profit? Does it declare dividends for its stockholders?
If it does not, it must be declared beyond the purview of Republic Act No. 875; but if it does, Republic Act No. 875
must apply to it. The University itself admits that it has declared dividends. 3 The CIR in its order dated March 30,
1963 in CIR Case No. 41-IPA which order was issued after evidence was heard also found that the
University is not for strictly educational purposes and that "It realizes profits and parts of such earning is
distributed as dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)" 4 Under
this circumstance, and in consonance with the rulings in the decisions of this Court, above cited, it is obvious that
Republic Act No. 875 is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it is
not an industrial establishment. At most, it says, it is only a lessee of the services of its professors and/or
instructors pursuant to a contract of services entered into between them. We find no merit in this claim. Let us
clarify who is an "employer" under the Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an employer, directly or indirectly, but shall not
include any labor organization (otherwise than when acting as an employer) or any one acting in the capacity or
agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in defining

"employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word "means" which the Act uses in defining
the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company
union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec.
2(m)]. A methodical variation in terminology is manifest. This variation and distinction in terminology and
phraseology cannot be presumed to have been the inconsequential product of an oversight; rather, it must have
been the result of a deliberate and purposeful act, more so when we consider that as legislative records show,
Republic Act No. 875 had been meticulously and painstakingly drafted and deliberated upon. In using the word
"includes" and not "means", Congress did not intend to give a complete definition of "employer", but rather that
such definition should be complementary to what is commonly understood as employer. Congress intended the
term to be understood in a broad meaning because, firstly, the statutory definition includes not only "a principal
employer but also a person acting in the interest of the employer"; and, secondly, the Act itself specifically
enumerated those who are not included in the term "employer", namely: (1) a labor organization (otherwise than
when acting as an employer), (2) anyone acting in the capacity of officer or agent of such labor organization [Sec.
2(c)], and (3) the Government and any political subdivision or instrumentality thereof insofar as the right to strike
for the purpose of securing changes or modifications in the terms and conditions of employment is concerned
(Section 11). Among these statutory exemptions, educational institutions are not included; hence, they can be
included in the term "employer". This Court, however, has ruled that those educational institutions that are not
operated for profit are not within the purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of the
term "employer". The term encompasses those that are in ordinary parlance "employers." What is commonly
meant by "employer"? The term "employer" has been given several acceptations. The lexical definition is "one who
employs; one who uses; one who engages or keeps in service;" and "to employ" is "to provide work and pay for; to
engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The
Workmen's Compensation Act defines employer as including "every person or association of persons,
incorporated or not, public or private, and the legal representative of the deceased employer" and "includes the
owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or
manager of the business carried on in the establishment or place of work but who, for reason that there is an
independent contractor in the same, or for any other reason, is not the direct employer of laborers employed
there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that "employer includes any person acting
directly or indirectly in the interest of the employer in relation to an employee and shall include the Government
and the government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any
person, natural or juridical, domestic or foreign, who carries in the Philippines any trade, business, industry,
undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et
al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve unfair labor practices and hence
within the purview of Republic Act No. 875, defined the term employer as follows:
An employer is one who employs the services of others; one for whom employees work and who pays their wages
or salaries (Black Law Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c, Rep. Act
875).
Under none of the above definitions may the University be excluded, especially so if it is considered that every
professor, instructor or teacher in the teaching staff of the University, as per allegation of the University itself, has a
contract with the latter for teaching services, albeit for one semester only. The University engaged the services of
the professors, provided them work, and paid them compensation or salary for their services. Even if the
University may be considered as a lessee of services under a contract between it and the members of its Faculty,
still it is included in the term "employer". "Running through the word `employ' is the thought that there has been an
agreement on the part of one person to perform a certain service in return for compensation to be paid by an
employer. When you ask how a man is employed, or what is his employment, the thought that he is under
agreement to perform some service or services for another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R.
557, 560, 122 S.E. Rep. 202).

To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is not
state that the employers included in the definition of 2 (c) of the Act. This contention can not be sustained. In the
first place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition of the
term "employer" are only and exclusively "industrial establishments"; on the contrary, as stated above, the term
"employer" encompasses all employers except those specifically excluded by the Act. In the second place, even
the Act itself does not refer exclusively to industrial establishments and does not confine its application thereto.
This is patent inasmuch as several provisions of the Act are applicable to non-industrial workers, such as Sec. 3,
which deals with "employees' right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices;
Section 8 which nullifies private contracts contravening employee's rights; Section 9 which relates to injunctions in
any case involving a labor dispute; Section 11 which prohibits strikes in the government; Section 12 which
provides for the exclusive collective bargaining representation for labor organizations; Section 14 which deals with
the procedure for collective bargaining; Section 17 which treats of the rights and conditions of membership in labor
organizations; Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation service,
compilation of collective bargaining contracts, advisory labor-management relations; Section 22 which empowers
the Secretary of Labor to make a study of labor relations; and Section 24 which enumerates the rights of labor
organizations. (See Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos,
G.R. No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the Industrial
Peace Act "refers only to organizations and entities created and operated for profits, engaged in a profitable trade,
occupation or industry". It cannot be denied that running a university engages time and attention; that it is an
occupation or a business from which the one engaged in it may derive profit or gain. The University is not an
industrial establishment in the sense that an industrial establishment is one that is engaged in manufacture or
trade where raw materials are changed or fashioned into finished products for use. But for the purposes of the
Industrial Peace Act the University is an industrial establishment because it is operated for profit and it employs
persons who work to earn a living. The term "industry", for the purposes of the application of our labor laws should
be given a broad meaning so as to cover all enterprises which are operated for profit and which engage the
services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor conditions in
any field of employment where the objective is earning a livelihood on the one side and gaining of a profit on the
other. Labor Law Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words
and Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would be no employer-employee relationship
between it and the striking members of the Faculty Club because the latter are not employees within the purview
of Sec. 2(d) of Republic Act No. 875 but are independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be limited to the employee of a particular
employer unless the act explicitly states otherwise and shall include any individual whose work has ceased as a
consequence of, or in connection with, any current labor dispute or because of any unfair labor practice and who
has not obtained any other substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include",
complementary. It embraces not only those who are usually and ordinarily considered employees, but also those
who have ceased as employees as a consequence of a labor dispute. The term "employee", furthermore, is not
limited to those of a particular employer. As already stated, this Court in the cases of The Angat River Irrigation
System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as "one who
employs the services of others; one for whom employees work and who pays their wages or salaries.
"Correlatively, an employee must be one who is engaged in the service of another; who performs services for
another; who works for salary or wages. It is admitted by the University that the striking professors and/or
instructors are under contract to teach particular courses and that they are paid for their services. They are,
therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites as
authority Francisco's Labor Laws, 2nd ed., p. 3, which states:

While the term "workers" as used in a particular statute, has been regarded as limited to those performing physical
labor, it has been held to embrace stenographers and bookkeepers. Teachers are not included, however.
It is evident from the above-quoted authority that "teachers" are not to be included among those who perform
"physical labor", but it does not mean that they are not employees. We have checked the source of the authority,
which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas
1917 D 676. A reading of the last case confirms Our view.
That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and
County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v.
Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W.
111, 112, 195 Minn. 357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far
Eastern University case, supra, considered university instructors as employees and declared Republic Act No. 875
applicable to them in their employment relations with their school. The professors and/or instructors of the
University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875 includes among
employees any individual whose work has ceased as consequence of, or in connection with a current labor
dispute. Striking employees maintain their status as employees of the employer. (Western Cartridge Co. v. NLRB,
C.C.A. 7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors are independent contractors, because the
University does not exercise control over their work, is likewise untenable. This Court takes judicial notice that a
university controls the work of the members of its faculty; that a university prescribes the courses or subjects that
professors teach, and when and where to teach; that the professors' work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their services by wages and salaries, rather
than by profits; that the professors and/or instructors cannot substitute others to do their work without the consent
of the university; and that the professors can be laid off if their work is found not satisfactory. All these indicate that
the university has control over their work; and professors are, therefore, employees and not independent
contractors. There are authorities in support of this view.
The principal consideration in determining whether a workman is an employee or an independent contractor is the
right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the
work, but the right to control, which constitutes the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E.
259, 261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee, and not a
contractor, though paid specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in Words and
Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by wages rather than by profits. (People vs.
Distributors Division, Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and
Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a contractor, are usually characterized by
regularity and continuity of work for a fixed period or one of indefinite duration, as contrasted with employment to
do a single act or a series of isolated acts; by compensation on a fixed salary rather than one regulated by value
or amount of work; . . . (Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71 in Words and
Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish contemplated result without consent of
contractee, while "employee" cannot substitute another in his place without consent of his employer. (Luker Sand
& Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent contractors, still they would be covered by
Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed that
Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United
States, and this Act did not exclude "independent contractors" from the orbit of "employees". It was in the
subsequent legislation the Labor Management Relation Act (Taft-Harley
Act) that "independent contractors" together with agricultural laborers, individuals in domestic service of the

home, supervisors, and others were excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows that they have a right to
unionize in accordance with the provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875) which
provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the right to self-organization and to form, join
or assist labor organizations of their own choosing for the purpose of collective bargaining through representatives
of their own choosing and to engage in concerted activities for the purpose of collective bargaining and other
mutual aid or protection. . . .
We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside in
the instant case, that the right of employees to self-organization is guaranteed by the Constitution, that said right
would exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are engaged
in commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching staff of private
universities, colleges, and schools in the Philippines, regardless of whether the university, college or school is run
for profit or not, are included in the term "employees" as contemplated in Republic Act No. 875 and as such they
may organize themselves pursuant to the above-quoted provision of Section 3 of said Act. Certainly, professors,
instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of
our labor laws and one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the Faculty Club can not unionize and the
Faculty Club can not exist as a valid labor organization is, therefore, without merit. The record shows that the
Faculty Club is a duly registered labor organization and this fact is admitted by counsel for the University.5a
The other issue raised by the University is the validity of the Presidential certification. The University contends that
under Section 10 of Republic Act No. 875 the power of the President of the Philippines to certify is subject to the
following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an industry
that is vital to the national interest. The University maintains that those conditions do not obtain in the instant case.
This contention has also no merit.
We have previously stated that the University is an establishment or enterprise that is included in the term
"industry" and is covered by the provisions of Republic Act No. 875. Now, was there a labor dispute between the
University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or
concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to
arrange terms or conditions of employment regardless of whether the disputants stand in proximate relation of
employer and employees.
The test of whether a controversy comes within the definition of "labor dispute" depends on whether the
controversy involves or concerns "terms, tenure or condition of employment" or "representation." It is admitted by
the University, in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the
President of the University a letter informing the latter of the organization of the Faculty Club as a labor union, duly
registered with the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which
was attached a list of demands consisting of 26 items, and asking the President of the University to answer within
ten days from date of receipt thereof; that the University questioned the right of the Faculty Club to be the
exclusive representative of the majority of the employees and asked proof that the Faculty Club had been
designated or selected as exclusive representative by the vote of the majority of said employees; that on February
1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason therefor the
refusal of the University to bargain collectively with the representative of the faculty members; that on February 18,
1963 the members of the Faculty Club went on strike and established picket lines in the premises of the University,
thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for
unfair labor practice against the University, but which was later dismissed (on April 2, 1963 after Case 41-IPA was
certified to the CIR); and that on March 7, 1963 a petition for certification election, Case No. 1183-MC, was filed by
the Faculty Club in the CIR.6 All these admitted facts show that the controversy between the University and the
Faculty Club involved terms and conditions of employment, and the question of representation. Hence, there was

a labor dispute between the University and the Faculty Club, as contemplated by Republic Act No. 875. It having
been shown that the University is an institution operated for profit, that is an employer, and that there is an
employer-employee relationship, between the University and the members of the Faculty Club, and it having been
shown that a labor dispute existed between the University and the Faculty Club, the contention of the University,
that the certification made by the President is not only not authorized by Section 10 of Republic Act 875 but is
violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor dispute in an industry indispensable to
the national interest and when such labor dispute is certified by the President to the Court of Industrial Relations,
said Court may cause to be issued a restraining order forbidding the employees to strike or the employer to
lockout the employees, and if no other solution to the dispute is found, the Court may issue an order fixing the
terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act No.
875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it was
held:
It thus appears that when in the opinion of the President a labor dispute exists in an industry indispensable to
national interest and he certifies it to the Court of Industrial Relations the latter acquires jurisdiction to act thereon
in the manner provided by law. Thus the court may take either of the following courses: it may issue an order
forbidding the employees to strike or the employer to lockout its employees, or, failing in this, it may issue an order
fixing the terms and conditions of employment. It has no other alternative. It can not throw the case out in the
assumption that the certification was erroneous.
xxx
xxx
xxx
. . . The fact, however, is that because of the strike declared by the members of the minority union which threatens
a major industry the President deemed it wise to certify the controversy to the Court of Industrial Relations for
adjudication. This is the power that the law gives to the President the propriety of its exercise being a matter that
only devolves upon him. The same is not the concern of the industrial court. What matters is that by virtue of the
certification made by the President the case was placed under the jurisdiction of said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not
interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is
exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960).
Once the jurisdiction is acquired pursuant to the presidential certification, the CIR may exercise its broad powers
as provided in Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship
may be threshed out before the CIR, and the CIR may issue such order or orders as may be necessary to make
effective the exercise of its jurisdiction. The parties involved in the case may appeal to the Supreme Court from the
order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the University "has some 18,000
students and employed approximately 500 faculty members", that `the continued disruption in the operation of the
University will necessarily prejudice the thousand of students", and that "the dispute affects the national interest", 7
and certified the dispute to the CIR, it is not for the CIR nor this Court to pass upon the correctness of the reasons
of the President in certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the return-to-work order (of March
30, 1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963). It alleges that the orders are
illegal upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103, has
withdrawn from the CIR the power to issue a return-to-work order; (2) that the only power granted by Section 10 of
Republic Act No. 875 to the CIR is to issue an order forbidding the employees to strike or forbidding the employer
to lockout the employees, as the case may be, before either contingency had become a fait accompli; (3) that the
taking in by the University of replacement professors was valid, and the return-to-work order of March 30, 1963
constituted impairment of the obligation of contracts; and (4) the CIR could not issue said order without having
previously determined the legality or illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial
Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be sustained.

them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)
When a case is certified by the President to the Court of Industrial Relations, the case thereby comes under the
operation of Commonwealth Act No. 103, and the Court may exercise the broad powers and jurisdiction granted to
it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order
"fixing the terms of employment." This clause is broad enough to authorize the Court to order the strikers to return
to work and the employer to readmit them. This Court, in the cases of the Philippine Marine Officers Association
vs. The Court of Industrial Relations, Compania Maritima, et al.; and Compaia Martima, et al. vs. Philippine
Marine Radio Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers' Association
that upon certification by the President under Section 10 of Republic Act 875, the case comes under the operation
of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries
indispensable to the national interest when the President certifies the case to the Court of Industrial Relations. The
evident intention of the law is to empower the Court of Industrial Relations to act in such cases, not only in the
manner prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction granted by
that act. If the Court of Industrial Relations is granted authority to find a solution to an industrial dispute and such
solution consists in the ordering of employees to return back to work, it cannot be contended that the Court of
Industrial Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its
power of conciliation and arbitration if it does not have the power and jurisdiction to carry into effect the solution it
has adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can
order the return of the workers with or without backpay as a term or condition of employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364,
July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No.
875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR has
found under the authority of the presidential certification and conformable thereto cannot be questioned (Radio
Operators Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29,
1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been
declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a
lockout when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co.,
Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:
There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is limited
to the prevention of strikes and lockouts. Even after a strike has been declared where the President believes that
public interest demands arbitration and conciliation, the President may certify the ease for that purpose. The
practice has been for the Court of Industrial Relations to order the strikers to work, pending the determination of
the union demands that impelled the strike. There is nothing in the law to indicate that this practice is abolished."
(Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the
return-to-work order would be an impairment of its contract with the replacements. As stated by the CIR in its order
of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would
return to work under the status quo arrangement and the University would readmit them, and the return-to-work
order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot disregard.
The faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from
their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost their right to go
back to their positions, because the declaration of a strike is not a renunciation of their employment and their
employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment
of replacements was not authorized by the CIR. At most, that was a temporary expedient resorted to by the
University, which was subject to the power of the CIR to allow to continue or not. The employment of replacements
by the University prior to the issuance of the order of March 30, 1963 did not vest in the replacements a
permanent right to the positions they held. Neither could such temporary employment bind the University to retain
permanently the replacements.
Striking employees maintained their status as employees of the employer (Western Castridge Co. v. National
Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of strikers do not displace

It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the
contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common good
and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar
subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the
return-to-work order without having resolved previously the issue of the legality or illegality of the strike, citing as
authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13,
1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances being very different.
The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not
certified by the President. In that case the company no longer needed the services of the strikers, nor did it need
substitutes for the strikers, because the company was losing, and it was imperative that it lay off such laborers as
were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this
Court in ruling, in that case, that the legality or illegality of the strike should have been decided first before the
issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs
the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking
professors and instructors because of impending bankruptcy. On the contrary, it was imperative for the University
to hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike
should be decided first before the issuance of the return-to-work order does not apply to the case at bar. Besides,
as We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation of an
agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the members of the Faculty Club to
return to their work, as their individual contracts for teaching had expired on March 25 or 31, 1963, as the case
may be, and consequently, there was also no basis for the return-to-work order of the CIR because the contractual
relationships having ceased there were no positions to which the members of the Faculty Club could return to.
This contention is not well taken. This argument loses sight of the fact that when the professors and instructors
struck on February 18, 1963, they continued to be employees of the University for the purposes of the labor
controversy notwithstanding the subsequent termination of their teaching contracts, for Section 2(d) of the
Industrial Peace Act includes among employees "any individual whose work has ceased a consequence of, or in
connection with, any current labor dispute or of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment."
The question raised by the University was resolved in a similar case in the United States. In the case of Rapid
Roller Co. v. NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their
employment. The company believing it had not committed any unfair labor practice, refused the employees' offer
and claimed the right to employ others to take the place of the strikers, as it might see fit. This constituted
discrimination in the hiring and tenure of the striking employees. When the employees went out on a strike
because of the unfair labor practice of the company, their status as employees for the purpose of any controversy
growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor
Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217.
For the purpose of such controversy they remained employees of the company. The company contended that they
could not be their employees in any event since the "contract of their employment expired by its own terms on
April 23, 1939."
In this we think the company is mistaken for the reason we have just pointed out, that the status of the employees
on strike became fixed under Sec. 2 (3) of the Act because of the unfair labor practice of the company which
caused the strike.
The University, furthermore, claims that the information for indirect contempt filed against the officers of the
University (Case No. V-30) as well as the order of April 29, 1963 for their arrest were improper, irregular and illegal
because (1) the officers of the University had complied in good faith with the return-to-work order and in those
cases that they did not, it was due to circumstance beyond their control; (2) the return-to-work order and the order
implementing the same were illegal; and (3) even assuming that the order was legal, the same was not Yet final

because there was a motion to reconsider it.

Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue the
order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision of that order is valid and legal.
Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to
punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the same
procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute
indirect contempt, among which is "disobedience or resistance to lawful writ, process, order, judgment, or
command of a court," and the person guilty thereof can be punished after a written charge has been filed and the
accused has been given an opportunity to be heard. The last paragraph of said section provides:
But nothing in this section shall be so construed as to prevent the court from issuing process to bring the accused
party into court, or from holding him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge Bautista
relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly
violated was within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations
under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from any award,
order or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for
special reason the court shall order that execution be stayed. Any award, order or decision that is appealed is
necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not
yet final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other
words, the Court of Industrial Relations, in cases involving strikes and lockouts, may compel compliance or
obedience of its award, order or decision even if the award, order or decision is not yet final because it is
appealed, and it follows that any disobedience or non-compliance of the award, order or decision would constitute
contempt against the Court of Industrial Relations which the court may punish as provided in the Rules of Court.
This power of the Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience of
an award, order or decision, even if not yet final, is a special one and is exercised only in cases involving strikes
and lockouts. And there is reason for this special power of the industrial court because in the exercise of its
jurisdiction over cases involving strikes and lockouts the court has to issue orders or make decisions that are
necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout, or to effect the
prompt creation of a situation that would be most beneficial to the management and the employees, and also to
the public even if the solution may be temporary, pending the final determination of the case. Otherwise, if the
effectiveness of any order, award, or decision of the industrial court in cases involving strikes and lockouts would
be suspended pending appeal then it can happen that the coercive powers of the industrial court in the settlement
of the labor disputes in those cases would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order,
award, or decision of the Court of Industrial Relations shall after such order, award or decision has become final,
conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are
final (meaning one that is not appealed) may be the subject of contempt proceedings. We believe that there is no
inconsistency between the above-quoted provision of Section 6 and the provision of Section 14 of Commonwealth
Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of
Section 14 an order, award or decision of the Court of Industrial Relations in cases involving strikes and lockouts
are immediately executory, so that a violation of that order would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under
Section 19 of Commonwealth Act No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of employment.In every contract of employment whether verbal or
written, it is an implied condition that when any dispute between the employer and the employee or laborer has
been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the provisions of this

Act . . . and pending award, or decision by the Court of such dispute . . . the employee or laborer shall not strike or
walk out of his employment when so enjoined by the Court after hearing and when public interest so requires, and
if he has already done so, that he shall forthwith return to it, upon order of the Court, which shall be issued only
after hearing when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or
settled; and if the employees or laborers fail to return to work, the Court may authorize the employer to accept
other employees or laborers. A condition shall further be implied that while such dispute . . . is pending, the
employer shall refrain from accepting other employees or laborers, unless with the express authority of the Court,
and shall permit the continuation in the service of his employees or laborers under the last terms and conditions
existing before the dispute arose. . . . A violation by the employer or by the employee or laborer of such an order or
the implied contractual condition set forth in this section shall constitute contempt of the Court of Industrial
Relations and shall be punished by the Court itself in the same manner with the same penalties as in the case of
contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a
complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order
was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged,
they were simply ordered arrested to be brought before the Judge to be dealt with according to law. Whether they
are guilty of the charge or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No.
L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that order. In
other words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR
had jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue
that order, and neither did it abuse its discretion when it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No.
1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification
election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said
order of April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that petition for certification
election was because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The
University opposed the petition for withdrawal, but at the same time it moved for the dismissal of the petition for
certification election.
It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee
relationship between the University and the Faculty Club, the alleged status of the Faculty Club as a labor union,
its majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club
should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA,
and, therefore, the motion to withdraw the petition for certification election should not have been granted upon the
ground that the issues in the first case were absorbed in the second case.
We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by
the discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L-21278.
After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification
election had in a way produced the situation desired by the University. After considering the arguments adduced
by the University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that
the CIR did not commit any error when it granted the withdrawal of the petition for certification election in Case No.
1183-MC. The principal case before the CIR is Case No. 41-IPA and all the questions relating to the labor disputes
between the University and the Faculty Club may be threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge
Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion for the
reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has
jurisdiction to issue that order of March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did
not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963
(although dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R.
No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction issued in

Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati University. It is so
ordered.

G.R. No. 119268

February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS

ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL,
INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October 28,
1994, in NLRC NCR CA No. 003883-92, and its resolution 2 dated December 13, 1994 which denied petitioners
motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in the
operation of "Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a 24-hour
work schedule under the boundary system. Under this arrangement, the petitioners earned an average of P400.00
daily. Nevertheless, private respondent admittedly regularly deducts from petitioners, daily earnings the amount of
P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal, petitioners decided to
form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when
they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were singled
out because they were the leaders and active members of the proposed union. Aggrieved, petitioners filed with the
labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and illegal deduction
of washing fees. In a decision3 dated August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the
judgment of the labor arbiter. The labor tribunal declared that petitioners are employees of private respondent,
and, as such, their dismissal must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is
hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the
complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M.
Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos,
Jr., and Joel Ordeniza, to their former positions without loss of seniority and other privileges appertaining thereto;
to pay the complainants full backwages and other benefits, less earnings elsewhere, and to reimburse the drivers
the amount paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed
another motion for reconsideration. This time, public respondent, in its decision 5 dated October 28, 1994, granted
aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and
private respondent have no employer-employee relationship. It held that the relationship of the parties is leasehold
which is covered by the Civil Code rather than the Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due
course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The
Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing
the complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the
instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave
abuse of discretion in rendering the assailed decision, arguing that:

I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO
GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A
SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO
REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERSTAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the
jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by the tribunal
exercising judicial or quasi-judicial power as to amount to lack of power.8 In labor cases, this Court has declared in
several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of
labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the
labor arbiter who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was
filed nor cash or surety bond was posted by private respondent. Nevertheless, the labor tribunal took cognizance
of the letter from private respondent and treated said letter as private respondent's appeal. In a certiorari action
before this Court, we ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from
private respondent as private respondent's appeal in clear violation of the rules on appeal prescribed under
Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when he
failed to resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and the
supplemental motion to dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the
NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing and
deciding an appeal without an appeal bond having been filed as required under Article 223 of the Labor Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule
governing position papers. In this case, the parties have already filed their position papers and even agreed to
consider the case submitted for decision, yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein and
the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to set
aside judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had,
without sufficient basis, extended the reglementary period for filing petition for relief from judgment contrary to
prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking
reconsideration of public respondent's decision dated April 28, 1994, which public respondent denied. With this
motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have
committed before resort to courts of justice can be had. 14 Thus, when private respondent filed a second motion for
reconsideration, public respondent should have forthwith denied it in accordance with Rule 7, Section 14 of its
New Rules of Procedure which allows only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is
under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision with proof of
service that a copy of the same has been furnished within the reglementary period the adverse party and provided
further, that only one such motion from the same party shall be entertained. [Emphasis supplied]

The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in
obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be
countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an
employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and
education. It may as well involve the survival of a business or an industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is
indubitably a prohibited pleading16 which should have not been entertained at all. Public respondent cannot just
disregard its own rules on the pretext of "satisfying the ends of justice", 17 especially when its disposition of a legal
controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the
subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of
rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking cognizance
and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in seeking
reliefs in labor cases.

undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually
necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance with law. The just
and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the
Labor Code. The requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence,
petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and after
affording them notice and hearing prior to termination. In the instant case, private respondent had no valid cause
to terminate the employment of petitioners. Neither were there two (2) written notices sent by private respondent
informing each of the petitioners that they had been dismissed from work. These lack of valid cause and failure on
the part of private respondent to comply with the twin-notice requirement underscored the illegality surrounding
petitioners' dismissal.

On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are
taxi drivers purely on the "boundary system". Under this system the driver takes out his unit and pays the
owner/operator a fee commonly called "boundary" for the use of the unit. Now, in the determination the existence
of employer-employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No.
73199, 26 October 1988) has applied the following four-fold test: "(1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control the employees
conduct."

Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.23 It must be emphasized, though, that recent judicial pronouncements 24 distinguish between
employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose
illegal dismissals were effected after such date. Thus, employees illegally dismissed prior to March 21, 1989, are
entitled to backwages up to three (3) years without deduction or qualification, while those illegally dismissed after
that date are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from
the time their actual compensation was withheld from them up to the time of their actual reinstatement. The
legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e., without
deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his
illegal dismissal. Considering that petitioners were terminated from work on August 1, 1991, they are entitled to full
backwages on the basis of their last daily earnings.

"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important that the
other requisites may even be disregarded". Under the control test, an employer-employee relationship exists if the
"employer" has reserved the right to control the "employee" not only as to the result of the work done but also as
to the means and methods by which the same is to be accomplished. Otherwise, no such relationship exists.
(Ibid.)

With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we
view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the
driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a tour of
duty is indeed a practice in the taxi industry and is in fact dictated by fair play. 25 Hence, the drivers are not entitled
to reimbursement of washing charges.

Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On
the matter of control, the drivers, once they are out plying their trade, are free to choose whatever manner they
conduct their trade and are beyond the physical control of the owner/operator; they themselves determine the
amount of revenue they would want to earn in a day's driving; and, more significantly aside from the fact that they
pay for the gasoline they consume, they likewise shoulder the cost of repairs on damages sustained by the
vehicles they are driving.

WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28,
1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its RESOLUTION
dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private respondent is directed to
reinstate petitioners to their positions held at the time of the complained dismissal. Private respondent is likewise
ordered to pay petitioners their full backwages, to be computed from the date of dismissal until their actual
reinstatement. However, the order of public respondent that petitioners be reimbursed the amount paid as washing
charges is deleted. Costs against private respondents.

Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is
covered by a charter agreement under the Civil Code rather than the Labor Code.18

SO ORDERED.

But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public
respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions of
this Court. The labor tribunal reasoned out as follows:

The foregoing ratiocination goes against prevailing jurisprudence.

In a number of cases decided by this Court, 19 we ruled that the relationship between jeepney owners/operators on
one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of
lessor-lessee. We explained that in the lease of chattels, the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages to
the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and
control over the latter. The management of the business is in the owner's hands. The owner as holder of the
certificate of public convenience must see to it that the driver follows the route prescribed by the franchising
authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to
withdraw the relationship between them from that of employer and employee. We have applied by analogy the
abovestated doctrine to the relationships between bus owner/operator and bus conductor, 20 auto-calesa
owner/operator and driver,21 and recently between taxi owners/operators and taxi drivers. 22 Hence, petitioners are

G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor
and Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)TUCP and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER
NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO,
CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY,
LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

compute the monetary awards due each complainant based on the available records of the respondents
retroactive as of three years prior to the filing of the instant case.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED
TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA
WERE ILLEGALLY DISMISSED. 7

FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private respondents against herein petitioners
assails the decision of respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers
Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP
etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly heard and decided
aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed
workers and (b) the existence of employer-employee relationship and granting respondent workers by reason
thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc.
as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except
Maria Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given
a daily allowance of three (P 3.00) pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to
Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed
a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)
underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) nonpayment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2,
3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador
Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong
tagalog. When confronted, Pelobello replied that the same was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the design of petitioner Haberdashery. But in the afternoon,
when again questioned about said barong, Pelobello and Zapata denied ownership of the same. Consequently a
memorandum was issued to each of them to explain on or before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial and in direct competition with the business of the
company. 2 Both respondents allegedly did not submit their explanation and did not report for work. 3 Hence, they
were dismissed by petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal
dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar
positions without loss of seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The
charge of unfair labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage
law is hereby ordered dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive
leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is directed to

SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said
decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have
repeatedly held in countless decisions that the test of employer-employee relationship is four-fold: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct. It is the so called "control test" that is the most important element. 8 This simply
means the determination of whether the employer controls or has reserved the right to control the employee not
only as to the result of the work but also as to the means and method by which the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the
operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter
directs an employee who may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's
measurements, and to sew the pants, coat or shirt as specified by the customer. Supervision is actively
manifested in all these aspects the manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager
Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and Ofel Bautista.
Other than this person (sic) must ask permission to the above mentioned before giving orders or instructions to the
tailors.
B. Before accepting the job orders tailors must check the materials, job orders, due dates and other things to
maximize the efficiency of our production. The materials should be checked (sic) if it is matched (sic) with the
sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your supervisors. If you have many due dates for certain day,
advise Ruben or Ofel at once so that they can make necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must advise the tailors
regarding the due dates so that we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle the
problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be subject to
disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only
as to the result but also the means and methods by which the same are to be accomplished. That private
respondents are regular employees is further proven by the fact that they have to report for work regularly from
9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00 daily if they report for work before
9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument that they are independent contractors
must fail. As established in the preceding paragraphs, private respondents did not exercise independence in their
own methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to
their completion. Unlike independent contractors who generally rely on their own resources, the equipment, tools,
accessories, and paraphernalia used by private respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these aspects.

paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee whose
continuance in the service is inimical to the employer's interest. 16

Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage
as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614
and reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, "All
employees paid by the result shall receive not less than the applicable new minimum wage rates for eight (8)
hours work a day, except where a payment by result rate has been established by the Secretary of Labor. ..." 12 No
such rate has been established in this case.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled
that:
No employer may rationally be expected to continue in employment a person whose lack of morals, respect and
loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and responsibility of his
office, has so plainly and completely been bared.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum
wages to private respondents has already been resolved in the decision of the Labor Arbiter where he stated:
"Hence, for lack of sufficient evidence to support the claims of the complainants for alleged violation of the
minimum wage, their claims for underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1,
2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC;
neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is
concerned, that issue has been laid to rest. As to private respondents, the judgment may be said to have attained
finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not himself appealed cannot obtain
from the appellate court-, any affirmative relief other than the ones granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance.
This is apparent from the provision defining the employees entitled to said allowance, thus: "... All workers in the
private sector, regardless of their position, designation or status, and irrespective of the method by which their
wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and
Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a
fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except
where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance
insofar as such workers are concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are
not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the performance thereof, they fall under one of the exceptions
stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private
respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor
Code).

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence
to their version and found their excuses that said barong tagalog was the one they got from the embroiderer for
the Assistant Manager who was investigating them, unbelievable.

That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and
proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writings should be resolved in the former's favor, is not an unreasonable or
unfair rule. But that disregard of the employer's own rights and interests can be justified by that concern and
solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. 17
More importantly, while the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an
employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine
the existence of said cause in accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously
insist on the existence of employer-employee relationship, because of the supervision and control of their
employer over them, were the very ones who exhibited their lack of respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of
private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the
Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal
dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of
service incentive leave pay to private respondents is deleted.
SO ORDERED.

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show
that a violation of the employer's rules has been committed and the evidence of such transgression, the copied
barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they not only failed to do so but instead went on
AWOL (absence without official leave), waited for the period to explain to expire and for petitioner to dismiss them.
They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of
union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the
lawful orders of the latter, a justifiable ground for termination of employment by the employer expressly provided
for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts inimical to
the interests of the employer, another justifiable ground for dismissal under the same Article of the Labor Code,

[G.R. No. 113542. February 24, 1998]

CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P. COSTALES, JR. in his capacity as
union president, petitioner, vs. UNDERSECRETARY BIENVENIDO E. LAGUESMA and

CORFARM GRAINS, INC., respondents.

[G.R. No. 114911. February 24, 1998]
CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by JUANITO P. COSTALES, JR.,
president, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, CORFARM GRAINS,
INC. and/or TEODY C. RAPISORA and HERMINIO RABANG, respondents.
DECISION
PANGANIBAN, J.:
The Court reiterates some fundamental labor doctrines: (1) this Court may review factual determinations where
the findings of the med-arbiter conflict with those of the undersecretary of labor; (2) an employer-employee
relationship may be established by substantial evidence; (3) procedural due process is satisfied by the grant of an
opportunity to be heard and an actual adversarial-type trial is not required; (4) the NLRC commits grave abuse of
discretion when it remands a case to the labor arbiter in spite of ample pieces of evidence on record which are
sufficient to decide the case directly; and (5) where illegal dismissal is proven, the workers are entitled to back
wages and other similar benefits without deductions or conditions.
Statement of the Case
These doctrines are used by the Court in resolving these consolidated petitions for certiorari under Rule 65,
challenging the resolutions of Undersecretary Bienvenido Laguesma and the National Labor Relations
Commission.
First Case
In G.R. No. 113542, hereafter referred to as the First Case, Petitioner Caurdanetaan Piece Workers
Union/Association (CPWU) prays for the nullification and reversal of Undersecretary Laguesmas Order dated
January 4, 1994 in OS-MA-A-8-119-93 (RO100-9207-RU-001), which granted Respondent Corfarms motion for
reconsideration and dismissed petitioners prayer for certification election. The dispositive portion of the assailed
Order reads as follows:
WHEREFORE, the questioned Order is hereby set aside and a new one issued dismissing the petition for
certification election for lack of merit.
In his earlier Order dated September 7, 1993, Laguesma affirmed Med-Arbiter Sinamar E. Limos order of March
18, 1993 which disposed as follows:
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the above-entitled petition is hereby granted.
Consequently, the motion to dismiss filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file employees of Corfarm Grains, Inc., within ten
(10) days from receipt hereof, with the following choices:
1. Caurdanetaan Piece Workers Union;
2. No Union
A pre-election conference is hereby set on March 29, 1993 at 2:00 o clock in the afternoon at the DOLE, Dagupan
District Office, Mayombo District, Dagupan City to thresh out the mechanics of the Certification Election. Employer
Corfarm Grains, Inc. is hereby directed to present its employment records for the period covering January to June
1992 evidencing payment of salaries of its employees.

WHEREFORE, the Decision of the Labor Arbiter dated 14 September 1993 is hereby SET ASIDE. Let the records
of the case be REMANDED to the Arbitration Branch of origin for immediate appropriate proceedings.
The labor arbiters decision that was reversed by Respondent NLRC disposed as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 92 complainants the following:
a) 13th month pay limited to three years in the amount of P4,788.00 each;
b) service incentive leave pay in the amount of P855.00 each for three years;
c) underpaid wages covering the period June 1989 to June 1992 which amount to P47,040.00 each;
d) backwages reckoned from June 1992, the date of dismissal[,] to September 1993, the date of promulgation of
the decision or a period of 14 months, in the amount of P22,344.00 each;
e) refund of P12.00/day deduction limited to three years which amounts to P12,096 each; and
f) to pay the complainants P1,000.00 each as damages.
4. To reinstate the complainants to their former position[s] immediately.
All other claims are hereby dismissed for lack of merit.
In a Resolution promulgated on March 28, 1994, Respondent NLRC denied petitioners motion for reconsideration.
The Facts
In his Consolidated Memorandum, the solicitor general recited the following pertinent facts, which we find amply
supported by the records:[
Petitioner union has ninety-two (92) members who worked as cargador at the warehouse and ricemills of private
respondent [referring to Respondent Corfarm] at Umingan, Pangasinan since 1982. As cargadores, they loaded,
unloaded and piled sacks of palay from the warehouse to the cargo trucks and those brought by cargo trucks for
delivery to different places. They were paid by private respondent on a piece rate basis. When private respondent
denied some benefits to these cargadores, the latter organized petitioner union. Upon learning of its formation,
private respondent barred its members from working with them and replaced [them] with non-members of the
union sometime in the middle of 1992.
On July 9, 1992, petitioner filed [a petition] for certification election before the Regional Office No. I of the
Department of Labor and Employment, San Fernando, La Union docketed as RO100-9207-RU-001.
While this petition for certification election was pending, petitioner also filed on November 16, 1992, a complaint
for illegal dismissal, unfair labor practice, refund of illegal deductions, payment of wage differentials, various
pecuniary benefits provided by laws, damages, legal interest, reinstatement and attorneys fees, against private
respondent before the Regional Arbitration Branch No. 1 of Dagupan City, docketed as NLRC RAB Case No. 01117-0184-92.
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case No. Sub-Rab 01-117-0184-92, directed the
parties to submit position paper on or before December 14, 1992, and to appear for hearing on the said date. Only
the complainant petitioner submitted its position paper on December 3, 1992.

Let the parties be notified accordingly.

Likewise in the scheduled hearing on December 14, 1992, private respondent did not appear[;] thus Labor Arbiter
Olairez allowed the president of petitioner union Juanito Costales to testify and present its evidence ex-parte.

Aggrieved by Respondent Laguesmas subsequent Order dated January 27, 1994 denying its motion for
reconsideration, petitioner filed this recourse before this Court.

On December 16 1992, another notice was sent to the parties to appear on [the] January 7, 1993 hearing by
Labor Arbiter Emiliano de Asis.

Second Case
In G.R. No. 114911, hereafter referred to as the Second Case, petitioner assails the Resolution promulgated on
February 16, 1994 in NLRC CA No. L-001109 by the National Labor Relations Commission (Respondent NLRC
the dispositive portion of which reads:

Before the scheduled hearing on January 7, 1993, complainant petitioner filed a motion to amend complaint and
to admit amended complaint. It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24, 1992;
2. Joint affidavit of Ricardo Aban, Armando Casing, Benjamin Corpuz, Danny Margadejas, Fidel Fortunato, Henry
de los Reyes, Anthony de Luna, Warlito Arguilles, Dominador Aguda, Marcelino Cayuda, Jr., Jaime Costales and

Juanito Mendenilla dated December 30, 1992;

3. Joint affidavit of Juanito Costales and Armando Casing dated January 7, 1993;
4. Affidavit signed by individual union members.

employee relationship between petitioner and movant. To our mind, said declarations being made against interest
deserve much evidentiary weight. Considering therefore, the foregoing, we have no alternative but to dismiss the
petition for lack of employer-employee relationship.

On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order granting the petition for certification election
earlier filed.

In the Second Case

On the other hand, Respondent NLRC ordered the remand of the case to the arbitration branch for further
proceedings because the issues at hand need further threshing out. Stressing the principle that allegations must
be proved by competent and credible evidence, it held:

Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal case issued the May 20, 1993 Order, the
dispositive portion [of] which reads:
WHEREFORE, respondents are hereby ordered to submit their position paper, together with their documentary
evidence, if any, within TEN (10) days from receipt of the order, otherwise we will be constrained to resolve this
case based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a Resolution denying the appeal filed by private
respondent against the order of Med-Arbiter Limos granting the petition for certification election.
Acting on said denial, private respondent filed a motion for reconsideration which was granted in an Order dated
January 4, 1994 by public respondent Laguesma dismissing the petition for certification election for lack of
employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4, 1994, Order but it was denied by public
respondent Laguesma in his January 27, 1994 Order which reaffirmed the dismissal of petition for certification
election.
Thus, the union filed its first petition for certiorari assailing the Orders of January 4 and 27, 1994 of public
respondent Laguesma dismissing the petition for certification election. The said petition is captioned as
Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido Laguesma, et al., respondents, docketed as
G.R. No. 113542 and raffled to the Second Division of this Honorable Court.
On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his decision finding the dismissal of petitioners
members illegal. On appeal by both parties, Respondent NLRC -- as earlier stated -- set aside the appealed
decision and remanded the case to the labor arbiter for further proceedings. Petitioners motion for reconsideration
was later denied.
The solicitor general, who was supposed to represent both public respondents, joined petitioner and filed a
Manifestation and Motion (In Lieu of Comment) dated July 25, 1994, praying that the petition in the First Case be
granted and that judgment be rendered annulling the assailed Orders of Respondent Laguesma. The Republics
counsel likewise filed another Manifestation and Motion (In Lieu of Comment) dated October 4, 1994 in the
Second Case, praying that judgment be rendered annulling the resolution of Public Respondent NLRC dated
February 16, 1994 and March 28, 1994 and order[ing] public respondent to proceed with the case instead of
remanding the same to the labor arbiter of origin.
In a Resolution dated March 29, 1995, this Court ordered the consolidation of the two cases.
Public Respondents Rulings In the First Case
Public Respondent Laguesma premised the dismissal of the petition for certification election on the absence of an
employer-employee relationship between petitioners members and private respondent. Professing reliance on the
control test in determining employer-employee relationship, his Order dated January 4, 1994[ explained:
It is settled in this jurisdiction that the most important factor in determining the existence of employer-employee
relationship is the control test or the question of whether or not the supposed employer exercises control over the
means and methods by which the work is to be done. In the instant case, it is not disputed that movant does not
exercise any degree of control over how the loading or unloading of cavans of palays to or from the trucks, to or
from the rice mills. Movants only concern is that said cavans of palay are loaded/unloaded. Absent therefore, the
power to control not only the end to be achieved but also the means to be used in reaching such end, no
employer-employee relationship could be said to have been established. We also noted that some of petitioners
members including its president, Juanito Costales, Jr., admitted in separate sworn statements that they offer and
actually perform loading and unloading work for various rice mills in Pangasinan and that the performance of said
work depends on the availability of work in said mills. They also categorically stated that there is no employer-

There is no question that under the Rules of the Commission, complaints may be resolved on the basis of the
Position Papers submitted by the parties and that the parties may be deemed to have waived their right to present
evidence after they have been given an opportunity to do so. These procedural rules, however should be read in
conjunction with the time[-]honored principle that allegations must be proved and established by competent and
credible evidence. In other words, mere allegations would not suffice despite the absence of evidence to the
contrary.
In subject case, complainants-appellants allegations that they are laborers of respondents-appellants receiving
P45.00 per days work of eight hours (p. 2, Amended Position Paper dated December 14, 1992, p. 31 Records; p.
2 Amended Complaint dated 16 December 1992, p. 70, Records) appears to be in conflict with their earlier
assertions that they are paid on the basis of the number of cavans of palay moved, piled, hauled and unloaded
from trucks or haulers multiplied by P0.12 [per] sack or cavan. And for the days earning respondents used to be
obliged to pay P57.00 per days earning -- (p. 2, Position Paper dated 24 November 1992; p. 17, Records).
Similarly attached to the records is a narrative report of [the] DOLE inspector where it was mentioned that Juanito
Costales, Jr., is the owner of Carcado Contracting Services and is not an employee of Corefarm [sic] Grains
(Narrative Report dated August 4, 1992, p. 10 Records).
Another reason why subject case should be remanded to the Labor Arbiter below is the fact that the personality of
complainant union has been raised in issue before the proper forum and adverse decision on the matter will
definitely affect the whole proceedings.
Furthermore, records show that an Amended Complaint was filed on December 23, 1992. This amended
complaint made no mention of the affidavits of Juanito Costales, Jr. and the 92 other workers which documents
were filed in January 1993. Likewise, the amended complaint contains but a general statement that the 92
workers of Corefarm [sic] Grains have been employed since 1982 which was adopted by the Labor Arbiter below
in his decision notwithstanding the fact that a number of these workers started working with respondent after
1982. Some of whom worked with the company in 1990 (Joint Affidavit dated 7 January 1993, pp. 96-98,
Records). Notwithstanding this fact, the Labor Arbiter in the decision under consideration allowed refund of
alleged deduction for a period of three years. In the same manner, payment of salary differential was also granted.
Indeed the issues at hand need further threshing out. Under the Rules, the Labor Arbiter is authorized to thresh
out issues (sec. 4, Rule V). As it is, we are not convinced by the conclusions of the Labor Arbiter.
The ends of justice would better be served if all parties are granted further opportunity to ventilate their respective
positions.
The Issues
In its Consolidated Memorandum dated September 19, 1995 filed before us, petitioner raises the following
grounds in support of its petition:
1. Grave abuse of discretion or acting in excess of jurisdiction, which is equivalent to lack of jurisdiction on the
part of public respondent in setting aside the labor arbiters decision and in remanding this case to the office of
origin for further proceedings is not necessary when in fact the mandatory requirements of due process have
been observed by the labor arbiter in rendering decision on the case;
2. Remand of the case to office of origin for further proceedings on matters already passed upon properly by the
labor arbiter is contrary to the rule of speedy labor justice and the [sic] social justice and to afford protection to
labor policy of the Philippine Constitution, which is a command that should not be disregarded by the courts in
resolving labor cases;

3. Remand of the case to the labor arbiter would only prolong social unrest and the suffering of injurious effects of
illegal dismissal by the 92 illegally dismissed workers[;] hence, said remand of the case without justification
constitutes an oppressive act committed by public respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of discretion in ordering the dismissal of the petition
for certification election
2 Whether Respondent NLRC acted with grave abuse of discretion in remanding the illegal dismissal case to the
labor arbiter for further proceedings.
The present controversy hinges on whether an employer-employee relationship between the CPWU members
and Respondent Corfarm has been established by substantial evidence.
The Courts Ruling
The two petitions are meritorious.
Main Issue: Employer-Employee Relationship
First Case: Certification Election
Petitioner contends that Respondent Laguesma committed grave abuse of discretion in dismissing the petition for
certification election by relying on private respondents bare allegation, in its motion for reconsideration, of lack of
employer-employee relationship. According to petitioner, Respondent Laguesma cannot reverse his Decision in
the absence of a concomitant change in his factual findings. Petitioner insists that all its members were
employees of private respondent, viz.:
The 92 workers, who are all union members of petitioner herein, have been rendering actual manual services as
cargadores in the warehouse and rice mills of private respondent, performing activities usually related to or
desirable by [sic] the business or trade of private respondent who is engaged in the buy and sell of palay as well
as warehousing of said commodity and milling the same for sale to customers in the form of milled rice. The 92
workers have performed their activities for the last ten (10) years prior to their having been illegally dismissed from
employment on June 18, 1992 or thereabouts.
Petitioner adds that many of its members received Christmas bonuses from private respondent.
On the other hand, Respondent Corfarm describes the contentions of petitioner as off-tangent, if not irrelevant.
First, the authority of the DOLE Secretary to decide appeals in representation cases is undeniable (see e.g.,
Sections 9 and 10 of Rule V, Book V, of the Implementing Rules and Regulations of the Labor Code; also Art. 259,
appeal from certification election orders, labor code). Second, petitioner completely misses the point that the
granting and denial of a motion for reconsideration involves the exercise of discretion . As submitted by the Public
Respondent in its Comment, among the ends to which a Motion for Reconsideration is addressed, one is precisely
to convince the court that its ruling is erroneous and improper, contrary to law or the evidence, x x x (Emphasis
found in the original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated January 4, 1994 rests on solid findings
of fact which should be accorded respect and finality. It attacks the petitioners allegation -- that it has 92 workers
who worked as cargador at its warehouses -- as gratuitous and not supported by any evidence x x x [because] as
late as this time of day in the litigation of this case, who exactly are those 92 workers cannot be known from the
records. (Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs. NLRC, cited by the solicitor general, has a
factual situation different from the case at bar. Waiting time, unlike that in RJL Martinez Fishing Corp., does not
obtain here. Likewise allegedly inapplicable are the rulings in Villavilla vs. Court of Appeals and in Brotherhood
Labor Unity Movement vs. Zamora.
Respondent Corfarm denies that it had the power of control, rationalizing that petitioners members were streethired workers engaged from time to time to do loading and unloading work x x x[;] [t]here [was] no superintendentin-charge x x x to give orders x x x[;] [and] there [were] no gate passes issued, nor tools, equipment and

paraphernalia issued by Corfarm for loading/unloading x x x It attributes error to the solicitor generals reliance on
Article 280 of the Labor Code. Citing Brent School, Inc. vs. Zamora, private respondent asserts that a literal
application of such article will result in absurdity, where petitioners members will be regular employees not only of
respondents but also of several other rice mills, where they were allegedly also under service. Finally, Corfarm
submits that the OSGs position is negated by the fact that petitioners members contracted for loading and
unloading services with respondent company when such work was available and when they felt like it x x x.
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates that in cases filed before
administrative or quasi-judicial bodies, like the Department of Labor, a fact may be established by substantial
evidence, i.e. that amount of evidence which a reasonable mind might accept as adequate to justify a conclusion.
Also fundamental is the rule granting not only respect but even finality to factual findings of the Department of
Labor, if supported by substantial evidence. Such findings are binding upon this Court, unless petitioner is able to
show that the secretary of labor (or the undersecretary acting in his place) has arbitrarily disregarded or
misapprehended evidence before him to such an extent as to compel a contrary conclusion if such evidence were
properly appreciated. This is rooted in the principle that this Court is not a trier of facts, and that the determinations
made by administrative bodies on matters falling within their respective fields of specialization or expertise are
accorded respect. Also well-settled is the doctrine that the existence of an employer-employee relationship is
ultimately a question of fact and that the findings thereon by the labor authorities shall be accorded not only
respect but even finality when supported by substantial evidence. Finally, in certiorari proceedings under Rule 65,
this Court does not, as a rule, evaluate the sufficiency of evidence upon which the labor officials based their
determinations. The inquiry is essentially limited to whether they acted without or in excess of jurisdiction or with
grave abuse of discretion. However, this doctrine is not absolute. Where the labor officers findings are contrary to
those of the med-arbiter, the Court -- in the exercise of its equity jurisdiction -- may wade into and reevaluate such
findings, which we now embark on in this case.
To determine the existence of an employer-employee relation, this Court has consistently applied the four-fold test
which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and
(4) the power to control -- the last being the most important element.
Our examination of the case records indubitably shows the presence of an employer-employee relationship.
Relying on the evidence adduced by the petitioners, Respondent Laguesma himself affirmed the presence of such
connection. Thus, in his Order dated September 7, 1993, he astutely held:
Anent the first issue, we find the annexes submitted by the respondent company not enough to prove that herein
petitioner is indeed an independent contractor. The existence of an independent contractor relationship is
generally established by the following criteria. The contractor is carrying on an independent business; [the] nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision over the workers; payment of the
contractors workers; the control and the supervision over the workers; the control of the premises; the duty to
supply the premises, tools, appliances, materials and laborers, and the mode, manner and terms of payment.
[Brotherhood Labor Unity Movement of the Philippines vs. Zamora, 147 SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a written contract which specifies the
performance of a specified piece of work, the nature and extent of the work and the term and duration of the
relationship between herein petitioner and respondent company belies the latters [sic] allegation that the former is
indeed and [sic] independent contractor.
Also, respondent failed to show by clear and convincing proof that herein respondent has the substantial capital or
investment to qualify as an independent contractor under the law. The premises, tools, equipments [sic] and
paraphernalia are all supplied by respondent company. It is only the manpower or labor force which the alleged
contractor supplies, suggesting the existence of a labor only contracting scheme which is prohibited by law.
Further, if herein petitioner is indeed an independent contractor, it should have offered its services to other
companies and not to work [sic] exclusively for the respondent company. It is therefore, clear that the alleged J.P.
Costales, Jr. Cargador Services cannot be considered as an independent contractor as defined by law.
In his subsequent order, Respondent Laguesma inexplicably reversed his above ruling and held that there was no
employer-employee relationship on the ground that Respondent Corfarm exercised no power of control over the
alleged employees.
It may be asked, why the sudden change of mind on the part of Respondent Laguesma? No additional pieces of

evidence were adduced and no existing ones were identified by Laguesma to support such strange reversal. The
unblemished fact is that private respondent was the recruiter and employer of petitioners members.
Shoppers Gain Supermart vs. NLRC provides the standard to determine whether a worker is an independent
contractor:
The applicable law is not Article 280 of the Labor Code which is cited by petitioners, but Art. 106, which provides:
Art. 106. Contractor or subcontractor. -- Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
xxxxxxxxx
xxxxxxxxx
There is labor-only contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (emphasis supplied)
In accordance with the above provision, petitioner corporation is deemed the direct employer of the private
respondents and thus liable for all benefits to which such workers are entitled, like wages, separation benefits and
so forth. There is no denying the fact that private respondents work as merchandisers, cashiers, baggers, checkout personnel, sales ladies, warehousemen and so forth were directly related, necessary and vital to the day-today operations of the supermarket; their jobs involved normal and regular functions in the ordinary business of the
petitioner corporation. Given the nature of their functions and responsibilities, it is improbable that petitioner did
not exercise direct control over their work. Moreover, there is no evidence--as in fact, petitioners do not even
allege--that aside from supplying the manpower, the labor agencies have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others.
It is undeniable that petitioners members worked as cargadores for private respondent. They loaded, unloaded
and piled sacks of palay from the warehouses to the cargo trucks and from the cargo trucks to the buyers. This
work is directly related, necessary and vital to the operations of Corfarm. Moreover, Corfarm did not even allege,
much less prove, that petitioners members have substantial capital or investment in the form of tools, equipment,
machineries, [and] work premises, among others. Furthermore, said respondent did not contradict petitioners
allegation that it paid wages directly to these workers without the intervention of any third-party independent
contractor. It also wielded the power of dismissal over petitioners; in fact, its exercise of this power was the
progenitor of the Second Case. Clearly, the workers are not independent contractors.
Applying Article 280 of the Labor Code, we hold that the CPWU members were regular employees of private
respondent. Their tasks were essential in the usual business of private respondent.
As we have ruled in an earlier case, the question of whether an employer-employee relationship exists in a certain
situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid or sidestep such
relationship, because that juridical vinculum engenders obligations connected with workmens compensation,
social security, medicare, minimum wage, termination pay and unionism. All too familiarly, Respondent Corfarm
sought refuge from these obligations. However, the records of this case clearly support the existence of the
juridical vinculum.
RJL Martinez Fishing Corporation cited by the solicitor general, is relevant because petitioners members were
also made to wait for loading and unloading of cavans of palay to and from the storage areas and to and from the
milling areas. This waiting time does not denigrate the regular employment of petitioners members. As ruled in
that case]
x x x Besides, the continuity of employment is not the determining factor, but rather whether the work of the
laborer is part of the regular business or occupation of the employer.(fn: Article 281, Labor Code, as amended;
Philippine Fishing Boat Officers and Engineer[s] Union vs. Court of Industrial Relations, 112 SCRA 159 (1982).
We are thus in accord with the findings of respondent NLRC in this regard.

Although it may be that private respondents alternated their employment on different vessels when they were not
assigned to petitioners boats, that did not affect their employee status. The evidence also establishes that
petitioners had a fleet of fishing vessels with about 65 ship captains, and as private respondents contended, when
they finished with one vessel they were instructed to wait for the next. As respondent NLRC had found:
We further find that the employer-employee relationship between the parties herein is not co-terminous with each
loading and unloading job. As earlier shown, respondents are engaged in the business of fishing. For this
purpose, they have a fleet of fishing vessels. Under this situation, respondents activity of catching fish is a
continuous process and could hardly be considered as seasonal in nature. So that the activities performed by
herein complainants, i.e. unloading the catch of tuna fish from respondents vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on any specific project or
seasonal activity. (fn: NLRC Decision, p. 94, Rollo.)
Alleged Admission of Lack of Employer-Employee Relationship
Respondent Corfarm argues that some of petitioners members including its president, Juanito P. Costales, Jr.[,]
admitted that they work for various rice mills in Pangasinan and that there is no employer-employee relations
between them and private respondents. It adds that the solicitor general, by arguing that there was an employeremployee relationship, attempts to substitute [his] judgment [with] that of public respondent undersecretary x x x
who found such admissions against self-interest on the part of petitioners members x x x.
These arguments are negligible. The alleged admissions cannot be taken against petitioners cause. First, the
contents of the admissions are highly suspect. The records reveal that the admissions of Juanito Costales, Jr.,
Carlito Costales and Juanito Medenilla were in the form of affidavits of adhesion which were identical in content,
differentiated only by the typewritten names and the signatures of the workers. Second, only three of the workers
executed such affidavits. Clearly, the admissions in such affidavits cannot work against petitioner unions cause.
Such pro forma and identical affidavits do not prove lack of employer-employee relationship against all members
of petitioner. Third, the employer-employee relationship is clearly proven by substantial evidence. Corfarm sorely
failed to show that petitioners members were independent contractors. We rule that no particular form of proof is
required to prove the existence of an employer-employee relationship. Any competent and relevant evidence may
show the relationship. If only documentary evidence would be required to demonstrate that relationship, no
scheming employer would ever be brought before the bar of justice. Fourth, and in any event, the alleged
admissions of the three workers that they worked with other rice mills do not work against them. Assuming
arguendo that they did work with other rice mills, this was required by the imperative of meeting their basic needs.
The employer-employee relationship having been duly established, the holding of a certification election
necessarily follows. It bears stressing that there should be no unnecessary obstacle to the holding of such
election, for it is a statutory policy that should not be circumvented. We have held that, in the absence of a legal
impediment, the holding of a certification election is the most democratic method of determining the employees
choice of their bargaining representative. It is the best means to settle controversies and disputes involving union
representation. Indeed, it is the keystone of industrial democracy.
Second Case: Illegal Dismissal
Petitioner assails the NLRC for setting aside the labor arbiters decision and remanding the case for further
proceedings. Petitioner argues that the order of remand will only prolong the agony of the 92 union members and
their families for living or existing without jobs and earnings to give them support. Further, petitioner contends:
The Labor Arbiter had rendered a decision (Annex D, Petition) on September 14, 1993 in favor of petitioner based
on the available records of the case after giving more than ample opportunities to private respondents herein to
submit their position paper and other pleadings alleging their evidences [sic] against the causes of action of
petitioner alleged in the complaint for illegal dismissal, unfair labor practice, non-payment of various benefits
granted by existing laws during their employment, illegal deductions or diminution of their underpaid daily wages,
non-payment of wage increases and other causes of action pleaded by the complainant or herein petitioner.
In short, Labor Arbiter Rolando Gambito rendered his decision based on the records of the case including
evidence available on record and after observing due process of law.

To support his opposition against the remand of the case, petitioner recites the chronological events of the case,
viz::
In the case at bar, private respondents were notified earlier in the latter part of 1992 regarding the pendency of the
complaint for illegal dismissal, unfair labor practice, damages, etc., but said respondents did not appear during the
initial hearing of the case [before] Labor Arbiter Ricardo Olairez, then the Arbiter handling the case. The case was
re-set for hearing at some other dates. On April 22, 1993, Atty. Alfonso C. Bince, Jr. appeared as counsel for
respondents at Dagupan City. Atty. Bince committed to the Labor Arbiter that the former will file the position paper
for his clients (Corfarm Grains, Inc., et al.) within ten (10) days from April 22, 1993, but still private respondents
Position Paper was not filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the case for illegal dismissal, etc. filed by
petitioner, issued an order to private respondents directing the latter (respondents) to submit their Position Paper
together with THEIR DOCUMENTARY EXHIBITS, if any, within 10 days from receipt of the order . Still, private
respondents counsel failed to submit private respondents Position Paper relative to the petitioners complaint for
illegal dismissal, unfair labor practice, etc. which is involved in G.R. No. 114911 pending action by this Honorable
Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of petitioner and/or the 92 illegally dismissed
workers based on the position paper filed by the latter and available records of the case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters decision should be set aside not only for
lack of competent and credible evidence but also for lack of procedural due process. Corfarm further contends
that in spite of the pendency of its motions to cross-examine petitioners witnesses and to suspend proceedings,
the labor arbiter ordered the submission of its position paper and documentary evidence within ten (10) days.
Respondent Corfarm insists:
Indeed, although proceedings before a Labor Arbiter are supposed to be non-litigious and the technicalities in the
courts of law need not be strictly applied, the proceedings should nevertheless be subject to the requirements of
due process as provided in Section 7, Rule 7 of the NLRC Rules of Procedure. (See also Phil. Telegraph and
Telephone Corp. vs. NLRC, 183 SCRA 451).
We agree with petitioner. Private respondent was not denied procedural due process, and the labor arbiters
decision was based on competent, credible and substantial evidence.
Procedural Due Process Observed
Private respondent had been duly informed of the pendency of the illegal dismissal case, but it chose not to
participate therein without any known justifiable cause. The labor arbiter sent notices of hearing or arbitration to
the parties, requiring them to submit position papers at 1:30 p.m. on November 14, 1992. Respondent Corfarm did
not attend the hearing. According to Respondent NLRC, there was no proof that Respondent Corfarm received
such notice. In any case, petitioner filed a Motion to Admit Amended Complaint on December 23, 1992. Again,
another notice for hearing or arbitration on January 7, 1993 was sent to the parties. This was received by
petitioners counsel as evidenced by the registry return receipt duly signed by private respondents counsel, Atty.
Alfonso Bince, Jr. It was only on January 28, 1993, however, that Atty. Bince entered his appearance as counsel
for Respondent Corfarm. On May 10, 1993, Corfarm was again given a new period of ten (10) days within which
to submit its position paper and documentary evidence; otherwise, [the labor arbiter] will be constrained to resolve
this case based on available evidence on record. As evidenced by a registry return receipt, a copy of said directive
was received by respondents counsel on May 25, 1993. Still and all, Corfarm failed to file its position paper.
Clearly, private respondent was given an opportunity to present its evidence, but it failed or refused to avail itself
of this opportunity without any legal reason. Due process is not violated where a person is given the opportunity to
be heard, but chooses not to give his side of the case.

To establish a cause of action, only substantial evidence is necessary, i.e., such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable might
conceivably opine otherwise. As ruled in Manalo vs. Roldan-Confesor::
Clear and convincing proof is x x x more than mere preponderance, but not to extent of such certainty as is
required beyond reasonable doubt as in criminal cases x x x (fn: Blacks Law Dictionary, 5th Ed., p. 227, citing
Fred C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211 S.E. 2d 88, 92) while substantial evidence x x x consists of
more than a mere scintilla of evidence but may be somewhat less than a preponderance x x x x (fn: Ibid., p. 1281,
citing Marker v. Finch, D.C. Del., 322 F. Supp. 905, 910) Consequently, in the hierarchy of evidentiary values, We
find proof beyond reasonable doubt at the highest level, followed by clear and convincing evidence,
preponderance of evidence, and substantial evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor arbiter relied upon, was available to
Respondent NLRC. These pieces of evidence are in the case records, as aptly pointed out by the solicitor general:
[Regarding] the quoted second sentence of public respondent NLRCs Resolution that allegations must be proved
and established by competent evidence, and that mere allegations would not suffice despite the absence of
evidence to the contrary, suffice it to say that there is ample evidence on record to support the Labor Arbiters
decision, to wit: 1) Narrative report of DOLE inspector Crisanto Rey Dingle noting some violation of underpayment
of minimum wage and underpayment of 13th month pay (page 10, record); 2) affidavit of union officers and
individual union members, stating their various claims (page 80-195, Record). Despite such evidence and an
opportunity afforded to private respondent to present its evidence and position paper as borne out by the notice of
hearing issued by Labor Arbiter Olairez dated November 14, 1992, with advice to the parties to submit their
position paper (p. 14 Record) and the Order issued by Labor Arbiter Gambito dated May 20, 1993; requiring
private respondents to submit their position paper, together with their documentary evidence (p. 247, record),
private respondent failed to submit its position paper and countervailing evidence which should have met squarely
the allegations and evidence adduced by the petitioner. Thus, in the absence of private respondents position
paper and countervailing evidence, the Labor Arbiter cannot be faulted in deciding the case based on the
available evidence on record.
It must be stressed that labor laws mandate the speedy administration of justice, with least attention to
technicalities but without sacrificing the fundamental requisites of due process. In this light, the NLRC, like the
labor arbiter, is authorized to decide cases based on the position papers and other documents submitted, without
resorting to the technical rules of evidence. Verily, Respondent NLRC noted several documentary evidence
sufficient to arrive at a just decision. Indeed, the evidence on record clearly supports the conclusion of the labor
arbiter that the petitioners were employees of respondent, and that they were illegally dismissed.
The NLRC points to conflicts and inconsistencies in the evidence on record. We are not convinced. These alleged
inconsistencies are too flimsy and too tenuous to preclude a just decision. The finding that Juanito Costales, Jr.
was an employee of respondent was allegedly inconsistent with his admission that he was the owner of Carcado
Contracting Services. As earlier observed, the inconsistency is irrelevant. Juan Costales, Jr. was an employee of
Corfarm. Owning this alleged outfit is not inconsistent with such employment. The NLRC also questioned the
amount of the employees compensation. In one instance, the workers stated that they were receiving P45.00 per
days work of eight hours. In another, they claimed that they were paid P0.12 per sack or cavan. These allegedly
differ from their allegation that Corfarm used to be obliged to pay P57.00 per days earning. The alleged
inconsistencies are more apparent than real. Records reveal that the P57 was the promised compensation;
however, there was an unauthorized deduction of P12; thus, the amount of P45 per day. The claim of P0.12 per
sack or cavan is the basic computation of how workers or haulers earn their wage for the day. In any event, the
alleged inconsistencies do not affect or diminish the established fact that petitioners members were regular
employees who were illegally dismissed.

Labor Arbiters Decision Based on Credible, Competent and Substantial Evidence

Contrary to the conclusions of the NLRC and the arguments of private respondent, the findings of the labor arbiter
on the question of illegal dismissal were based on credible, competent and substantial evidence.

Why Respondent NLRC refused to rule directly on the appeal escapes us. The remand of a case or an issue to
the labor arbiter for further proceedings is unnecessary, considering that the NLRC was in a position to resolve the
dispute based on the records before it and particularly where the ends of justice would be served thereby.
Remanding the case would needlessly delay the resolution of the case which has been pending since 1992. As
already observed, the evidence on record clearly supports the findings of the labor arbiter.

It is to be borne in mind that proceedings before labor agencies merely require the parties to submit their
respective affidavits and position papers. Adversarial trial is addressed to the sound discretion of the labor arbiter.

Pursuant to the doctrine that this Court has a duty to settle, whenever possible, the entire controversy in a single
proceeding, leaving no root or branch to bear the seeds of future litigation, we now resolve all issues.

It is axiomatic that in illegal dismissal cases, the employer always has the burden of proof and his failure to
discharge this duty results in a finding that the dismissal was unjustified. Having defaulted from filing its position
paper, Respondent Corfarm is deemed to have waived its right to present evidence and counter the allegations of
petitioners members.
In the same light, we sustain the labor arbiters holding in respect of unfair labor practice. As ruled by Labor Arbiter
Rolando D. Gambito:
The last issue: Instead of sitting down with the individual complainants or the union officers to discuss their
demands, respondents resorted to mass lay-off of all the members of the union and replaced them with outsiders.
This is clearly a case of union busting which Art. 248 of the Labor Code prohibits. Art. 248 provides that It shall be
unlawful for an employer to commit any of the following unfair labor practice (a) To interfere with, restrain or
coerce employees in the exercise of their right to self-organization; (b) x x x (c) To contract out service or functions
being performed by union members when such will interfere with, restrain or coerce employees in the exercise of
their rights to self-organization.
In view of recent jurisprudence, we are correcting some items in the labor arbiters decision. The thirteenth month
pay awarded should be computed for each year of service from the time each employee was hired up to the date
of his actual reinstatement. The same computation applies to the award of the service incentive leave and
underpaid wages. Each employee is to be paid the remaining underpaid wages from the date of his or her hiring in
accordance with the then prevailing wage legislations. Likewise, a refund of P12 shall be computed for each day
of service of each employee, to be reckoned from the date such employee was hired. The damages awarded
should be sustained because the employer acted in bad faith. Back wages are to be computed from the date of
dismissal up to the date of actual reinstatement without any deductions or conditions. This is in consonance with
Fernandez, et al. vs. National Labor Relations Commission:
x x x Accordingly, the award to petitioners of backwages for three years should be modified in accordance with
Article 279 of the Labor Code, as amended by R.A. 6715, by giving them full backwages without conditions and
limitations, the dismissals having occurred after the effectivity of the amendatory law on March 21, 1989. Thus, the
Court held in Bustamante:
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the deduction of earnings elsewhere rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to full backwages as meaning exactly that,
i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the
period of his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542, Respondent Laguesmas Orders dated January
4, 1994 and January 27, 1994 are REVERSED and SET ASIDE; whereas his Order dated September 7, 1993 is
REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions promulgated on February 16, 1994 and
March 28, 1994 are likewise REVERSED AND SET ASIDE. The Labor Arbiters decision dated September 14,
1993 is reinstated with MODIFICATIONS as set out in this Decision. Respondent NLRC is ORDERED to
COMPUTE the monetary benefits awarded in accordance with this Decision and to submit its compliance thereon
within thirty days from notice of this Decision.
SO ORDERED.

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO
DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing
vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether
or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing
vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in
the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said
fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief
engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second
fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were
paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As
agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total
proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received ten percent
(10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum
income of P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman received a
minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of
private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report
that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the
charge claiming that the same was a countermove to their having formed a labor union and becoming members of
Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September
3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal
charges were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return
to the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th
month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department)
of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 144983 to 1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being given ample time to
look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its
position paper denying the employer-employee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing
furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the
pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations were
conducted, mode of payment of compensation for services rendered by the fishermen-crew members, and the
circumstances leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint
decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one of
employer-employee relationship existed between private respondent and petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of
the labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and
petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent, petitioners invite attention to the following:
that they were directly hired by private respondent through its general manager, Arsenio de Guzman, and its
operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private
respondent from 8 to 15 years in various capacities; that private respondent, through its operations manager,
supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips,
the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishing
port, which were communicated to the patron/pilot by radio (single side band); that they were not allowed to join
other outfits even the other vessels owned by private respondent without the permission of the operations
manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch which
were delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow
company policies, rules and regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and
petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it
added facts not contained in the records when it stated that the pilot-crew members do not receive compensation
from the boat-owners except their share in the catch produced by their own efforts; that public respondent ignored
the evidence of petitioners that private respondent controlled the fishing operations; that public respondent did not
take into account established jurisprudence that the relationship between the fishing boat operators and their crew
is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and
executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said
decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA
347 (1982), the Solicitor General claims that the ruling of public respondent that a "joint fishing venture" exists
between private respondent and petitioners rests on the resolution of the Social Security System (SSS) in a 1968
case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises,
private respondent herein, from compulsory coverage of the SSS on the ground that there is no employeremployee relations between the boat-owner and the fishermen-crew members following the doctrine laid down in
Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra,
that there is no employer-employee relationship between the boat-owner and the pilot and crew members when
the boat-owner supplies the boat and equipment while the pilot and crew members contribute the corresponding
labor and the parties get specific shares in the catch for their respective contribution to the venture, the Solicitor
General pointed out that the boat-owners in the Pajarillo case, as in the case at bar, did not control the conduct of
the fishing operations and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than
to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated in
Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61
SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is
to be accorded to any claim of a procedural misstep, the idea being that its power be exercised according to
justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl
fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea performing
their job to earn a living to support their families, convince Us to adopt a more liberal attitude in applying to
petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984
by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision
eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners'
occupation as fishermen-crew members, who during the pendency of the case understandably have to earn a
living by seeking employment elsewhere, impress upon Us that in the ordinary course of events, the information
as to the adverse decision against them would not reach them within such time frame as would allow them to

faithfully abide by the 10-calendar day appeal period. This peculiar circumstance and the fact that their
representative is a non-lawyer provide equitable justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7)
days after receipt of the decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship, the elements
that are generally considered are the following (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished. 8 The employment relation arises from contract of
hire, express or implied. 9 In the absence of hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where the
person for whom the services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. The test calls merely for the existence of the right to control the
manner of doing the work, not the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint
fishing venture" existed between private respondent and petitioners is not applicable in the instant case. There is
neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where
the Court found that the pilots therein are not under the order of the boat-owners as regards their employment;
that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long
and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former
have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any
reference to the owners of the vessel; and that they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the
fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to
be under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of
the schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private
respondent. 12 While performing the fishing operations, petitioners received instructions via a single-side band
radio from private respondent's operations manager who called the patron/pilot in the morning. They are told to
report their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct
of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is
responsible for disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when
De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708
exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous
for public respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of
the changes in the conditions of employment agreed upon by the private respondent and petitioners as discussed
earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under
no obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day
and be the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were
directly hired by private respondent, through its general manager, Arsenio de Guzman, and its operations
manager, Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years
in various capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner
Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a
mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel; Jose Parma was
employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he
was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as
winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of
petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for
a period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the
Labor Code as they were indeed engaged to perform activities usually necessary or desirable in the usual fishing

business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business of private respondent, it must be
noted that petitioners received compensation on a percentage commission based on the gross sale of the fishcatch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during
the fishing trip, otherwise only 10% of the proceeds of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered, and included the
fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the
form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in
accordance with their own understanding 15 is not supported by recorded evidence. Except that such claim
appears as an allegation in private respondent's position paper, there is nothing in the records showing such a
sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at
midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to
board the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air
their side on the accusation against them unmistakably reveals the disciplinary power exercised by private
respondent over them and the corresponding sanction imposed in case of violation of any of its rules and
regulations. The virtual dismissal of petitioners from their employment was characterized by undue haste when
less extreme measures consistent with the requirements of due process should have been first exhausted. In that
sense, the dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually
resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the
parties herein. A joint venture, including partnership, presupposes generally a parity of standing between the joint
co-venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It would be
inconsistent with the principle of parity of standing between the joint co-venturers as regards the conduct of
business, if private respondent would outrightly exclude petitioners from the conduct of the business without first
resorting to other measures consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral
action, private respondent should have discussed with an open mind the advantages and disadvantages of
petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties. But this
was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal complaints
were filed against them. The lame excuse of private respondent that the non-filing of the criminal complaints
against petitioners was for humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In
Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master
fisherman locally known as "maestro" in charge of recruiting others to complete the crew members are considered
employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973)
where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the
fishermen crew members because of an alleged partnership agreement between him, as financier, and Simplicio
Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of
the WCC that there existed an employer-employee relationship between the boat-owner and the fishermen crew
members not only because they worked for and in the interest of the business of the boat-owner but also because
they were subject to the control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban,
the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao
basis" still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982),

we held that the employer-employee relationship between the crew members and the owners of the fishing
vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or
undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The said ruling is
premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form part
of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor
Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered
to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other
monetary benefits under the law. No pronouncement as to costs.
SO ORDERED.

G.R. Nos. 82823-24 July 31, 1989

AGRO COMMERCIAL SECURITY SERVICES AGENCY, INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR
HERMOGENES and MANUEL JIMENEZ. ET AL., respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
Mauricio Law Office for private respondents.

ARBITER

BIENVENIDO

V.

GANCAYCO, J.:
Is there an employer-employee relationship between a security agency and its security guards? Is the so-called
"floating status" of a security guard lawful and could such prolonged status amount to illegal dismissal? These are
the issues raised in this petition for certiorari and prohibition with preliminary injunction questioning the resolution
dated January 20, 1988 of public respondent National Labor Relations Commission (NLRC) affirming the decision
of public respondent labor arbiter Bienvenido V. Hermogenes dated March 19, 1987 finding private respondents to
have been illegally dismissed and ordering petitioner to pay them separation pay of one-half (1/2) month salary for
every year of service, 13th month pay for the year 1986 and the money value of their respective service incentive
leave amounting to fifteen (15) days salary each with allowances. The petition also assails the resolution of the
respondent NLRC dated April 18, 1988 denying the motion for reconsideration filed by petitioner.
Private respondents, numbering forty-six (46) in all, worked as security guards and/or janitors under individual
contracts with petitioner. They were assigned to firms and offices where petitioner had contracts providing security
and janitorial services. Their service period and last rates of salary are stated in the decision of the labor arbiter. 1
Their individual contracts of employment provide, among others, as follows:
3.d. That the security guard, agrees to temporary suspension of his employment completely to include such
changes in his employment status with the Agency, in case of termination of contract between the Agency and its
Client, or reduction in force of same;
In the early part of 1986, petitioner's service contracts with various corporations and government agencies to
which private respondents were previously assigned had been terminated generally due to the sequestration of
the said offices by the Presidential Commission on Good Government. Accordingly, many of the private
respondents were placed on "floating status" on September 16, 1986. A number of them had been put on that
status even earlier. "Floating status" means an indefinite period of time when private respondents do not receive
any salary or financial benefit provided by law. A number of them later obtained employment in other security
agencies.
On account of the uncertainty of their employment with the petitioner, on July 25, 1986, private respondents filed a
complaint for illegal dismissal in the Arbitration Branch of the Department of Labor and Employment against
petitioner. They sought the payment of their respective separation pay, 13th month pay for 1986 and service
incentive leave pay. After due' proceedings where the parties were required to submit their position papers and
stipulation of facts, the respondent labor arbiter ruled in favor of the private respondents whose decision as aboverelated was affirmed by the NLRC.
Hence, the herein petition alleging that the petitioner was denied due process of law by the NLRC and it
committed a grave abuse of discretion in considering private respondents as employees of petitioner, in ruling that
the "floating status" of private respondents amounted to an illegal dismissal, and in causing the execution of the
judgment pending a complete and full adjudication of the issues.
Forthwith, the allegation of denial of due process is without basis. Petitioner was afforded the opportunity to file its
position paper. It even entered into a stipulation of facts with private respondent.
As to the issue of employer-employee relationship, an examination of the records shows that private respondents
are regular employees of petitioner. Their individual length of service ranges from four (4) to more than ten (10)
years. In accordance with the stipulation of facts, it appears that private respondents worked with petitioner as
security guards/janitors Their employment contracts provide, among others:
1. That the AGENCY hereby undertakes to look for, procure, and/or furnish the services of the SECURITY
GUARD, with any individual, business establishment, residential houses or any entity whatsoever, and the
SECURITY GUARD agrees to supply his services, assignments, position and undertaking, subject to the following
conditions:
a) That the SECURITY GUARD upon acceptance of his position or undertaking for employment, shall observe,
follow and obey all rules, regulations, code of conduct required by the AGENCY and any of its contracted client, in
accordance with the provisions of RA 5487 and its implement Rules and Regulations;
b) That the AGENCY shall pay the SECURITY GUARD a monthly salary of P _______/day payable on the 5th and
20th of the month;
c) That the AGENCY shall have the exclusive right to withdraw or re-assign the SECURITY GUARD;
d) That the SECURITY GUARD, agrees to temporary suspension of his employment completely to include such

changes; in bis employment status with the AGENCY, in case of termination of contract between the AGENCY and
its client, or reduction in force of same;
e) That the AGENCY may terminate or dismiss the SECURITY GUARD, if, after proper and due investigation it is
shown that the SECURITY GUARD has violated any rule, regulation, code of conduct and discipline, imposed by
the AGENCY;
f) That the terms and conditions pertinent to service and discipline embodied in the Agreement executed between
the AGENCY and any person, establishment, or entity with whom the SECURITY GUARD is going to serve or is
assigned shall be considered part of this Agreement and therefore binding on SECURITY GUARD. 2
It was petitioner who determined how much private respondents received as their monthly salary, overtime/night
differential pay, mid-year and Christmas bonus and 13th month pay, uniforms and meal allowances and other
benefits mandated by law. Private respondents were reported by the petitioner as its employees for purposes of
social security coverage. Petitioner remitted their withholding taxes to the Bureau of Internal Revenue and made
monthly contributions to the Pag-ibig fund for their benefit. It was petitioner who determined and decided on the
assignments, promotions and salary increases of private respondents, their working hours, the firearms to be
issued to them and janitorial devices and tools to be used. Likewise, it was petitioner who imposed the appropriate
disciplinary measures on private respondents by way of reprimand, suspension and dismissal.
In determining the existence of an employee-employer relationship, the following elements are generally
considered:
1) the selection and engagement of the employees;
2) payment of wages;
3) the power of dismissal and
4) the power to control the employees' conduct . 3
It is clear, therefore, that private respondents are petitioner's regular employees who enjoy security of tenure and
who cannot be dismissed except for cause . 4
As to the alleged illegal dismissal of private respondents, the records show that they filed their complaint against
petitioner on July 25, 1986. At the time they filed their complaint, most of them were still on the job or on
assignments and it was only in September 1986 when most of them were placed on "floating status."
Obviously, the filing of the complaint was premature. Apparently, this issue was not raised at all and so it is
deemed waived. Thus, when the labor arbiter rendered his decision, he considered those who have been out of
work or "floating status" for a period exceeding six (6) months to have been terminated from the service without
just cause thus entitling them to the corresponding benefits for such separation. We agree.
Under Article 286 of the Labor Code it is provided as follows:
ART. 286. When employment not deemed terminated. The bonafide suspension of the operation of a business
or undertaking for a period not exceeding six months, or the fulfillment by the employee of a military or civic duty
shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position
without loss of seniority rights if he indicates his desire to resume his work not later than one month from the
resumption of operations of his employer or from his relief from the military or civic duty.
From the foregoing it is clear that when the bonafide suspension of the operation of a business or undertaking
exceeds six (6) months then the employment of the employee shall be deemed terminated. By the same token
and applying the said rule by analogy to security guards, if they remained without work or assignment that is in
"floating status" for a period exceeding six (6) months, then they are in effect constructively dismissed.
The labor arbiter disagreed with the representations of petitioner that the private respondents who accepted
assignments in other security agencies without previously resigning should be considered to have been dismissed
with just cause. In the stipulation of facts, the parties admitted that the disciplinary rules promulgated by petitioner
for its employees provide that acceptance by an employee of other employment without first resigning from the
agency is a cause for dismissal.
In this case, it appears that twenty-seven (27) of the private respondents violated this rule by accepting
employment in other security agencies without previously resigning from employment with petitioner. No doubt,
this is a just cause for termination of their services and as such they are not entitled to any separation pay. 5

As regards the other seventeen (17) private respondents, they admittedly remained in "floating status" for more
than six (6) months. Such a 'floating status" is not unusual for security guards employed in security agencies as
their assignments primarily depend on the contracts entered into by the agency with third parties. Such a
stipulated status is, therefore, lawful.
The "floating status" of such an employee should last only for a reasonable time. In this case, respondent labor
arbiter correctly held that when the "floating status" of said employees lasts for more than six (6) months, they may
be considered to have been illegally dismissed from the service. Thus, they are entitled to the corresponding
benefits for their separation.
WHEREFORE, the petition is GRANTED insofar as the twenty- seven (27) private respondents are concerned
who have accepted employment elsewhere. The questioned resolutions of the NLRC dated January 29, 1988 and
April 18, 1988 are hereby modified as to said twenty-seven (27) private respondents in that their complaint is
hereby dismissed for lack of merit. The questioned resolutions are hereby affirmed in all other respects as to the
other private respondents. No pronouncement as to costs.
SO ORDERED.

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding Commissioner
RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents.
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul the 10

February 1995 Decision 1 of the National Labor Relations Commission (hereafter NLRC), and its 6 April 1995
Resolution 2 denying the motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision reversed
that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as
part of the filming crew with a salary of P375.00 per week. About four months later, he was designated Assistant
Electrician with a weekly salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was
promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P539.00 in
September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of
the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to P475.00
on 21 December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as
instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing" of the
lighting system, and performing other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to facilitate
their request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992,
Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a
blank employment contract. As petitioners refused to sign, private respondents forced Enero to go on leave in
June 1992, then refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was again
asked to sign a blank employment contract, and when he still refused, private respondents terminated his services
on 20 July 1992. 5 Petitioners thus sued for illegal dismissal 6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva
Productions, Inc., and that it is primarily engaged in the distribution and exhibition of movies but not in the
business of making movies; in the same vein, private respondent Vic del Rosario is merely an executive producer,
i.e., the financier who invests a certain sum of money for the production of movies distributed and exhibited by
VIVA. 7
Private respondents assert that they contract persons called "producers" also referred to as "associate
producers" 8 to "produce" or make movies for private respondents; and contend that petitioners are project
employees of the association producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi," who
hired petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that Maraguinot
was released upon payment of his last salary, as his services were no longer needed. Anent petitioner Enero, he
was hired for the movie entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on vacation on 8 June
1992, and by the time he reported for work on 20 July 1992, shooting for the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the respondents. The producer cannot
be considered as an independent contractor but should be considered only as a labor-only contractor and as such,
acts as a mere agent of the real employer, the herein respondent. Respondents even failed to name and specify
who are the producers. Also, it is an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents, Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in
this case.
It is very clear also that complainants are doing activities which are necessary and essential to the business of the
respondents, that of movie-making. Complainant Maraguinot worked as an electrician while complainant Enero
worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their former positions without loss [of] seniority rights
and pay their backwages starting July 21, 1992 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr. and
thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or P8,400.00 on top of the
award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision
February 1995, the NLRC found the following circumstances of petitioners' work "clearly established:"

12

of 10

1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-terminus
with each movie project the completion/termination of which are pre-determined, such fact being made known to
complainants at the time of their engagement.
xxx xxx xxx
2 Each shooting unit works on one movie project at a time. And the work of the shooting units, which work
independently from each other, are not continuous in nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by
complainants in a month show extreme variations. . . For instance, complainant Maraguinot worked for only 1.45
hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant Enero logged a total of only
31.57 hours in September 1991 but worked for 183.35 hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on a daily basis. Complainant
Maraguinot was supposed to report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25 days.
Complainant Enero worked on 10 September 1991 and his next scheduled working day was 28 September 1991,
a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work explain the lump sum payment for
complainants' services for each movie project. Hence, complainants were paid a standard weekly salary
regardless of the number of working days and hours they logged in. Otherwise, if the principle of "no work no pay"
was strictly applied, complainants' earnings for certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such movie companies like
Regal, Seiko and FPJ Productions whenever they are not working for the independent movie producers engaged
by respondents . . . This allegation was never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that
complainants (herein petitioners) were "project employees."
After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6 April 1995, petitioners filed
the instant petition, claiming that the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that petitioners were not illegally
dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private respondents, petitioners cited
their performance of activities that were necessary or desirable in the usual trade or business of private
respondents and added that their work was continuous, i.e., after one project was completed they were assigned
to another project. Petitioners thus considered themselves part of a work pool from which private respondents
drew workers for assignment to different projects. Petitioners lamented that there was no basis for the NLRC's
conclusion that they were project employees, while the associate producers were independent contractors; and
thus reasoned that as regular employees, their dismissal was illegal since the same was premised on a "false
cause," namely, the completion of a project, which was not among the causes for dismissal allowed by the Labor
Code.
Private respondents reiterate their version of the facts and stress that their evidence supports the view that
petitioners are project employees; point to petitioners' irregular work load and work schedule; emphasize the
NLRC's finding that petitioners never controverted the allegation that they were not prohibited from working with
other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie
industry.

first. 22
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise
questions of fact, particularly, the NLRC's finding that petitioners were project employees, a finding supported by
substantial evidence; and submits that petitioners' reliance on Article 280 of the Labor Code to support their
contention that they should be deemed regular employees is misplaced, as said section "merely distinguishes
between two types of employees, i.e., regular employees and casual employees, for purposes of determining the
right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a series of
projects, they should be deemed regular employees. Citing Mamansag v. NLRC, 14 the OSG asserts that what
matters is that there was a time-frame for each movie project made known to petitioners at the time of their hiring.
In closing, the OSG disagrees with petitioners' claim that the NLRC's classification of the movie producers as
independent contractors had no basis in fact and in law, since, on the contrary, the NLRC "took pains in explaining
its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a
special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one who complains
that the NLRC acted in total disregard of evidence material to or decisive of the controversy. 15 In the instant case,
petitioners allege that the NLRC's conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee
relationship existed between petitioners and private respondents or any one of private respondents. If there was
none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have been
unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del
Rosario is necessarily engaged in such business as he finances the production of movies. VIVA, on the other
hand, alleges that it does not "make" movies, but merely distributes and exhibits motion pictures. There being no
further proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed below,
private respondents' evidence even supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate
producers who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only
in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code
describes permissible job contracting in this wise:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in the business of making
motion pictures. As such, and to be a job contractor under the preceding description, associate producers must
have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures.
However, the associate producers here have none of these. Private respondents' evidence reveals that the moviemaking equipment are supplied to the producers and owned by VIVA. These include generators, 16 cables and
wooden platforms, 17 cameras and "shooting equipment;" 18 in fact, VIVA likewise owns the trucks used to transport
the equipment. 19 It is thus clear that the associate producer merely leases the equipment from VIVA. 20 Indeed,
private respondents' Formal Offer of Documentary Evidence stated one of the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who rented
Shooting Unit No. 3 with a fixed budget and time-frame of at least 30 shooting days or 45 days whichever comes

Private respondent further narrated that VIVA's generators broke down during petitioners' last movie project, which
forced the associate producer concerned to rent generators, equipment and crew from another company. 23 This
only shows that the associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in effect admit that their
producers, especially petitioners' last producer, are not engaged in permissible job contracting.
If private respondents insist that the associate producers are labor contractors, then these producers can only be
"labor-only" contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor. . . .
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises
and other materials; and
(2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent
or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA
cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant
case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members
from an "available group of free-lance workers which includes the complainants Maraguinot and Enero." 24 And in
their Memorandum, private respondents declared that the associate producer "hires the services of . . . 6) camera
crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician;
(e) clapper; etc. . . . ." 25 This clearly showed that the associate producers did not supply the workers required by
the movie project.
The relationship between VIVA and its producers or associate producers seems to be that of agency, 26 as the
latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the employment relationship
between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct
employer.
The employer-employee relationship between petitioners and VIVA can further be established by the "control test."
While four elements are usually considered in determining the existence of an employment relationship, namely:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control of the employee's conduct, the most important element is the employer's control of
the employee's conduct, not only as to the result of the work to be done but also as to the means and methods to
accomplish the same. 27 These four elements are present here. In their position paper submitted to the Labor
Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the
ultimate finish[ed] product is acceptable to the company . . .

The ensure that qualify films are produced by the PRODUCER who is an independent contractor, the company
likewise employs a Supervising PRODUCER, a Project accountant and a Shooting unit supervisor. The
Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time, and the
Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to monitor
the progress of the PRODUCER's work accomplishment. He is there usually in the field doing the rounds of
inspection to see if there is any problem that the PRODUCER is encountering and to assist in threshing out the
same so that the film project will be finished on schedule. He supervises about 3 to 7 movie projects
simultaneously [at] any given time by coordinating with each film "PRODUCER". The Project Accountant on the
other hand assists the PRODUCER in monitoring the actual expenses incurred because the company wants to
insure that any additional budget requested by the PRODUCER is really justified and warranted especially when
there is a change of original plans to suit the tast[e] of the company on how a certain scene must be presented to
make the film more interesting and more commercially viable. (emphasis supplied).
VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company." The
means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be
finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes
are subject to change to suit the taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA
and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems
encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie director's control, and not VIVA's
direction. The director merely instructs petitioners on how to better comply with VIVA's requirements to ensure that
a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a
supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the
employer.
Moreover, appointment slips 28 issued to all crew members state:
During the term of this appointment you shall comply with the duties and responsibilities of your position as well as
observe the rules and regulations promulgated by your superiors and by Top Management.
The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top Management" of
VIVA. By commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment
slips only emphasize VIVA's control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and exercised
by VIVA. A sample appointment slip offered by private respondents "to prove that members of the shooting crew
except the driver are project employees of the Independent Producers" 29 reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This appointment shall be
effective upon the commencement of the said project and shall continue to be effective until the completion of the
same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.
During the term of this appointment you shall comply with the duties and responsibilities of your position as well as
observe the rules and regulations promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
_________________

Name of appointee
Signed in the presence of:
___________________
Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired
the crew members; moreover, it is VIVA's corporate name which appears on the heading of the appointment slip.
What likewise tells against VIVA is that it paid petitioners' salaries as evidenced by vouchers, containing VIVA's
letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable
conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were
project employees whose employment was automatically terminated with the completion of their respective
projects. Petitioners assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work
pool; 31 and, while petitioners were initially hired possibly as project employees, they had attained the status of
regular employees in view if VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee when the following
concur:
1) There is a continuous rehiring of project employees even after cessation of a project; 32 and
2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual
business or trade of the employer. 33
However, the length of time during which the employee was continuously re-hired is not controlling, but merely
serves as a badge of regular employment. 34
In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years
and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years
and worked on at least twenty-three (23) projects. 35 Moreover, as petitioners' tasks involved, among other chores,
the loading, unloading and
FILM

DATE
STARTED

DATE
COMPLETED

ASSOCIATE PRODUCER

LOVE AT FIRST SIGHT

1/3/90

2/16/90

MARIVIC ONG

PAIKOT-IKOT

1/26/90

3/11/90

EDITH MANUEL

ROCKY & ROLLY

2/13/90

3/29/90

M. ONG

PAIKOT-IKOT (addl. 1/2)

3/12/90

4/3/90

E. MANUEL

ROCKY & ROLLY (2nd contract)

4/6/90

5/20/90

M. ONG

NARDONG TOOTHPICK

4/4/90

5/18/90

JUN CHING

BAKIT KAY TAGAL NG SANDALI

6/26/90

10/20/90

E. MANUEL

BAKIT KAY TAGAL (2nd contract)

8/10/90

9/23/90

E. MANUEL

HINUKAY KO NA ANG LIBINGAN MO

9/6/90

10/20/90

JUN CHING

MAGING SINO KA MAN

10/25/90

12/8/90

SANDY STA. MARIA

M. SINO KA MAN (2nd contract)

12/9/90

1/22/91

SANDY S

NOEL JUICO

1/29/91

3/14/90

JUN CHING

NOEL JUICO (2nd contract)

3/15/91

4/6/91

JUN CHING

ROBIN GOOD

5/7/91

6/20/91

M. ONG

UTOL KONG HOODLUM # 1

KAPUTOL NG ISANG AWIT

6/23/91
8/18/91

8/6/91
10/2/91

JUN CHING
SANDY S.

DARNA

10/4/91

11/18/91

E. MANUEL

DARNA (addl. 1/2)

11/20/91

12/12/91

E. MANUEL

P. KABAYO (Addl 1/2 contract)

4/21/90

5/13/90

RUTH GRUTA

BADBOY

6/15/90

7/29/90

EDITH MANUEL

BADBOY (2nd contract)

7/30/90

8/21/90

E. MANUEL

ANAK NI BABY AMA

9/2/90

10/16/90

RUTH GRUTA

A.B. AMA (addl 1/2)

10/17/90

11/8/90

RUTH GRUTA

A.B. AMA (addl 2nd 1/2)

11/9/90

12/1/90

R. GRUTA

BOYONG MANALAC

11/30/90

1/14/91

MARIVIC ONG

HUMANAP KA NG PANGET

1/20/91

3/5/91

EDITH MANUEL

H. PANGET(2nd contract)

3/10/91

4/23/91

E. MANUEL

B. MANALAC (2nd contract)

5/22/91

7/5/91

M. ONG

ROBIN GOOD (2nd contract)

7/7/91

8/20/91

M. ONG

PITONG GAMOL

8/30/91

10/13/91

M. ONG

P. GAMOL (2nd contract)

10/14/91

11/27/91

M. ONG

GREASE GUN GANG

12/28/91

2/10/92

E. MANUEL

ALABANG GIRLS (1/2 contract)

3/4/92

3/26/92

M. ONG

BATANG RILES

3/9/92

3/30/92

BOBBY GRIMALT

UTOL KONG HOODLUM (part 2)

3/22/92

5/6/92

B. GRIMALT

UTOL (addl. 1/2 contract)

5/7/92

5/29/92

B. GRIMALT

MANDURUGAS (2nd contract)

5/25/92

7/8/92

JERRY OHARA

MAHIRAP MAGING POGI

7/2/92

8/15/92

M. ONG

MAGNONG REHAS

12/13/91

1/27/92

BOBBY GRIMALT

M. REHAS (2nd contract)

1/28/92

3/12/92

B. GRIMALT

HIRAM NA MUKHA

3/15/92

4/29/92

M. ONG

HIRAM (2nd contract)

5/1/92

6/14/92

M. ONG

KAHIT AKO'Y BUSABOS

5/28/92

7/7/92

JERRY OHARA

A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular
employees proves most instructive:

SIGAW NG PUSO

7/1/92

8/4/92

M. ONG

SIGAW (addl. 1/2)

8/15/92

9/5/92

M. ONG

NGAYON AT KAILANMAN

9/6/92

10/20/92

SANDY STA. MARIA

The denial by petitioners of the existence of a work pool in the company because their projects were not
continuous is amply belied by petitioners themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called to
report of a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied
to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the
same time enables the workers to attain the status of regular employees. Clearly, the continuous rehiring of the
same set of employees within the framework of the Lao Group of Companies is strongly indicative that private
respondents were an integral part of a work pool from which petitioners drew its workers for its various projects.

While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of
Respondents' Position Paper; OR, 29):

FILM

DATE STARTED

DATE COMPLETED

ASSOCIATE PRODUCER

GUMAPANG KA SA LUSAK

1/27/90

3/12/90

JUN CHING

PETRANG KABAYO

2/19/90

4/4/90

RUTH GRUTA

LUSAK (2nd contract)

3/14/90

4/27/90

JUN CHING

arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to
the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety. 36

In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point
out that the workers were not regularly maintained in the payroll and were free to offer their services to other
companies when there were no on-going projects. This argument however cannot defeat the workers' status of
regularity. We apply by analogy the vase of Industrial-Commercial-Agricultural Workers Organization v. CIR [16
SCRA 526, 567-568 (1966)] which deals with regular seasonal employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of
course, no compensation can be demanded from the employer because the stoppage of operations at the end of
a project and before the start of a new one is regular and expected by both parties to the labor relations. Similar to

the case of regular seasonal employees, the employment relation is not severed by merely being suspended .
[citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from
services but merely on leave of absence without pay until they are reemployed . Thus we cannot affirm the
argument that non-payment of salary or non-inclusion in the payroll and the opportunity to seek other employment
denote project employment. 37 (emphasis supplied)

decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the
modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.

While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No.
19 38 regarding work pools specifically applies, there seems to be no impediment to applying the underlying
principles to industries other than the construction industry. 39 Neither may it be argued that a substantial
distinction exists between the projects undertaken in the construction industry and the motion picture industry. On
the contrary, the raison d' etre of both industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire
a project employee even after completion of the project for which he was hired. The import of this decision is not to
impose a positive and sweeping obligation upon the employer to re-hire project employees. What this decision
merely accomplishes is a judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool
employees who perform tasks necessary or desirable to the employer's usual business or trade. Let it not be said
that this decision "coddles" labor, for as Lao has ruled, project or work pool employees who have gained the status
of regular employees are subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied
to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the
same time enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector,
40
but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that
simply because an employee is a project or work pool employee even outside the construction industry, he is
deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of
tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer,
then the employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and
jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of
Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial
security by project or work pool employees who have already gained the status of regular employees by the
employer's conduct.
In closing then, as petitioners had already gained the status of regular employees, their dismissal was
unwarranted, for the cause invoked by private respondents for petitioners' dismissal, viz.: completion of project,
was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now
entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of work" and "no pay" between the end of one
project and the start of a new one, in computing petitioners' back wages, the amounts corresponding to what could
have been earned during the periods from the date petitioners were dismissed until their reinstatement when
petitioners' respective Shooting Units were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant
to Section 34 thereof which amended Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC,
42
petitioners are entitled to receive full back wages from the date of their dismissal up to the time of their
reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal,
subject however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its Resolution dated 6 April
1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of discretion, and the

submission to the SSS. On March 16, 1979, complainant reported back for work upon expiration of his leave but
was informed by ALU's Area Vice-President for Luzon of his termination effective March 15, 1979. Hence, this
complaint filed on March 28, 1979. On April 18, 1979, however, ALU filed a clearance application to terminate
complainant's services effective March 16, 1979 on the ground of abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of the petitioner and ordered the respondent Union to reinstate
the petitioner to his former position with full backwages and to pay him emergency allowance, 13th month pay and
to refund his Mutual Aid Fund Deposit in the amount of P 370.00.
Respondent ALU appealed to the Ministry of Labor. On October 23,1979, the respondent Deputy Minister set
aside the order of the Director and dismissed the petitioner's complaint for lack of merit. In his order, the Deputy
Minister found that the petitioner was merely accomodated by the respondent union after he was dismissed by his
former employer sometime in 1972 and that his membership coverage with the SSS which shows that respondent
ALU is the one paying the employer's share in the premiums is not conclusive proof that respondent is the
petitioner's employer because such payments were performed by the respondent as a favor for all those who were
performing full time union activities with it to entitle them to SSS benefits. The Deputy Minister further ruled that
the non-existence of an employer-employee relationship between the parties is bolstered by the fact that
respondent ALU is not an entity for profit but a duly registered labor union whose sole purpose is the
representation of its bona fide organization units where it is certified as such.
In this petition, the petitioner contends that the respondent Deputy minister committed grave abuse of discretion in
holding that there was no employer-employee relationship between him and the respondent union so much so that
he is not entitled to the benefits that he is praying for.
We agree with the petitioner.
There is nothing in the records which support the Deputy minister's conclusion that the petitioner is not an
employee of respondent ALU. The mere fact that the respondent is a labor union does not mean that it cannot be
considered an employer of the persons who work for it. Much less should it be exempted from the very labor laws
which it espouses as labor organization. In case of es v. Brotherhood Labor Unity Movement in the Phillipines
Zamora, , (147 SCRA 49, 54), we outlined the factors in ascertaining an employer-employee realtionship:
In determining the existence of an employer-employee relationship, the elements that are generally considered
are the following : (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which
the work is to be accomplished. It is the so-called 'control test' that is the most important element (Investment
Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 492; Mafinco Trading Corp. v. Ople, supra,
and Rosario Brothers, Inc. v. Ople, 131 SCRA 72)
G.R. No. L-52824 March 16, 88
REYNALDO BAUTISTA, petitioner,
vs.
HON. AMADO C. INCIONG, in his capacity as Deputy Minister of Labor and ASSOCIATED LABOR UNIONS
(ALU), respondents.
GUTIERREZ, JR., J.:
This is an illegal dismissal case. The respondent Deputy Minister dismissed the complaint of herein petitioner
principally on the ground that no employer-employee relationship existed between the petitioner and respondent
Associated Labor Unions (ALU).
The facts as found by the National Capital Region Director of the then ministry of Labor (MOL) Region IV are as
follows:
Complainant (petitioner) was employed by ALU as 'Organizer' in 1972 with a starting salary of P250.00 a month.
As such he paid his monthly SSS contributions, with the respondent as his employer. On March 15, 1979, He was
left in the office of ALU while his other co-organizers were in Cainta, Rizal attending a certification election at
Chrysler Philippines, as he was not the organizer assigned in said company. On March 16, 1979, he went on sick
leave for ten (10) days. His SSS sickness benefit application form signed by ALU's physician was given to ALU for

In the case at bar, the Regional director correctly found that the petitioner was an employee of the respondent
union as reflected in the latter's individual payroll sheets and shown by the petitioner's membership with the Social
Security System (SSS) and the respondent union's share of remittances in the petitioner's favor. Even more
significant, is the respondent union's act of filing a clearance application with the MOL to terminate the petitioner's
services. Bautista was selected and hired by the Union. He was paid wages by the Union. ALU had the power to
dismiss him as indeed it dismissed him. And definitely, the Union tightly controlled the work of Bautista as one of
its organizers. There is absolutely no factual or legal basis got deputy Minister Inciong's decision.
We are, thus, constrained to reverse the findings of the respondent Deputy Minister. However, the records show
that antipathy and antagonism between the petitioner and the respondent union militate against the former's
reinstatement. ALU would not want to have a union organizer whom it does not trust and who could sabotage its
efforts to unionize commercial and industrial establishments. Severance pay, therefore, is more proper in order. As
we have ruled in the case of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et al., (G.R. No. 56398, July 23,
1987) quoting the cast of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the backwages are being awarded on the basis of equity or in the nature of
severance pay. This means that a monetary award is to be paid to the employees as an alternative to
reinstatement which can no longer be effected in view of the long passage of time or because of the realities of
the situation. (Emphasis supplied)

service incentive leave (SIL).8

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Deputy Minister is
ANNULLED and SET ASIDE. The Order of Regional Director Francisco L. Estrella is REINSTATED and ordered
executed but instead of returning the petitioner to his former position, the private respondent is ordered to pay him
an amount equal to his backwages for only three years and the separation pay to which he may be entitled as of
the end of the three year period under the applicable law or collective bargaining agreement.
SO ORDERED.

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995. Macasio
claimed that David exercised effective control and supervision over his work, pointing out that David: (1) set the
work day, reporting time and hogs to be chopped, as well as the manner by which he was to perform his work; (2)
daily paid his salary of P700.00, which was increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in
2005; and (3) approved and disapproved his leaves. Macasio added that David owned the hogs delivered for
chopping, as well as the work tools and implements; the latter also rented the workplace. Macasio further claimed
that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is, therefore,
not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the Implementing Rules
and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually starts his work at 10:00 p.m.
and ends at 2:00 a.m. of the following day or earlier, depending on the volume of the delivered hogs; (2) received
the fixed amount of P700.00 per engagement, regardless of the actual number of hours that he spent chopping
the delivered hogs; and (3) was not engaged to report for work and, accordingly, did not receive any fee when no
hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005. He
pointed to the Certificate of Employment 12 that David issued in his favor which placed the date of his employment,
albeit erroneously, in January 2000. Second, he reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter on
"pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasios request,
only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay," 14 executed by
Presbitero Solano and Christopher (Antonio Macasios co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave credence to
Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following facts to support this
finding: (1) Macasio received the fixed amount of P700.00 for every work done, regardless of the number of hours
that he spent in completing the task and of the volume or number of hogs that he had to chop per engagement; (2)
Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and
(3) the P700.00 fixed wage far exceeds the then prevailing daily minimum wage of P382.00. The LA added that
the nature of Davids business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime, holiday,
SIL and 13th month pay.

G.R. No. 195466

July 2, 2014
ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the November 22, 2010 decision2 and the
January 31, 2011 resolution 3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled
and set aside the May 26, 2010 decision 4 of the National Labor Relations Commission (NLRC) 5 which, in turn,
affirmed the April 30, 2009 Decision 6 of the Labor Arbiter (LA). The LA's decision dismissed respondent John G.
Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint 7 against petitioner Ariel L. David, doing business under
the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month pay. He also
claimed payment for moral and exemplary damages and attorneys fees. Macasio also claimed payment for

The NLRCs Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not require
Macasio to observe an eight hour work schedule to earn the fixed P700.00 wage; and that Macasio had been
performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion of the assigned
task, irrespective of the time consumed in its performance. Since Macasio was paid by result and not in terms of
the time that he spent in the workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and
holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration 19 but the NLRC denied his motion in its August 11, 2010 resolution, 20
prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision, 22 the CA partly granted Macasios certiorari petition and reversed the NLRCs
ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found
Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos Transit. 23
The CA explained that as a task basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th

month pay only if he is likewise a "field personnel." As defined by the Labor Code, a "field personnel" is one who
performs the work away from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasios case, the elements that characterize a "field personnel" are evidently lacking as
he had been working as a butcher at Davids "Yiels Hog Dealer" business in Sta. Mesa, Manila under Davids
supervision and control, and for a fixed working schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with 10%
attorneys fees on the total monetary award. The CA, however, denied Macasios claim for moral and exemplary
damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration 24 in the CAs January 31, 2011
resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the latter is
excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions before the lower
tribunals27 and adds that he never had any control over the manner by which Macasio performed his work and he
simply looked on to the "end-result." He also contends that he never compelled Macasio to report for work and
that under their arrangement, Macasio was at liberty to choose whether to report for work or not as other butchers
could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their (David and
Macasios) established "pakyawan" arrangement that rendered a written contract unnecessary. In as much as
Macasio is a task basis employee who is paid the fixed amount of P700.00 per engagement regardless of the
time consumed in the performance David argues that Macasio is not entitled to the benefits he claims. Also, he
posits that because he engaged Macasio on "pakyaw" or task basis then no employer-employee relationship
exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when, as
in this case, they are supported by substantial evidence. Hence, David posits that the CA erred in reversing the
labor tribunals findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court
believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to Davids position, the
P700.00 fee that he was paid for each day that he reported for work does not indicate a "pakyaw" or task basis
employment as this amount was paid daily, regardless of the number or pieces of hogs that he had to chop.
Rather, it indicates a daily-wage method of payment and affirms his regular employment status. He points out that
David did not allege or present any evidence as regards the quota or number of hogs that he had to chop as basis
for the "pakyaw" or task basis payment; neither did David present the time record or payroll to prove that he
worked for less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan" agreement, Macasio
concludes that he was Davids employee. Procedurally, Macasio points out that Davids submissions in the present
petition raise purely factual issues that are not proper for a petition for review on certiorari. These issues whether
he (Macasio) was paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an employeremployee relationship existed between him and David; and whether David exercised control and supervision over
his work are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the CAs
factual findings bind this Court, absent a showing that such findings are not supported by the evidence or the CAs
judgment was based on a misapprehension of facts. He adds that the issue of whether an employer-employee
relationship existed between him and David had already been settled by the LA 29 and the NLRC30 (as well as by
the CA per Macasios manifestation before this Court dated November 15, 2012), 31 in his favor, in the separate
illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and
13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition before the
CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion in ruling that Macasio is
entitled to these labor standards benefits.
The Courts Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding, this
Courts power of review is limited to resolving matters pertaining to any perceived legal errors that the CA may
have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional errors, which
we undertake in an original certiorari action. In reviewing the legal correctness of the CA decision, we examine the
CA decision based on how it determined the presence or absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision on the merits of the case was correct. 32 In
other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against the
assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th month
pay. This one is a question of law. The determination of this question of law however is intertwined with the largely
factual issue of whether Macasio falls within the rule on entitlement to these claims or within the exception. In
either case, the resolution of this factual issue presupposes another factual matter, that is, the presence of an
employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on
"pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of
employment relationship. Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or independent
contractorship. Article 97(6) of the Labor Code defines wages as "xxx the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 101 36 of the Labor Code speaks of workers paid by results or those
whose pay is calculated in terms of the quantity or quality of their work output which includes "pakyaw" work and
other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of the entire
case to determine the presence or existence of that relationship. This approach however is not authorized under a
Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee but
because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday
and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case Macasio filed with
the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-employee relationship. 37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact a
non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by the CA
under 65, the narrow scope of inquiry is whether the CA correctly determined the presence or absence of grave
abuse of discretion on the part of the NLRC. In concrete question form, "did the NLRC gravely abuse its discretion
in denying Macasios claims simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists
baseless. Employing the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee.
To determine the existence of an employer-employee relationship, four elements generally need to be considered,
namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;

and (4) the power to control the employees conduct. These elements or indicators comprise the so-called "fourfold" test of employment relationship. Macasios relationship with David satisfies this test.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is
entitled to holiday, 13th month, and SIL pay.

First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the
employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply
po siya sa akin at kinuha ko siya na chopper[.]" 39 Also, Solano and Antonio stated in their "Pinagsamang
Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher"
and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming trabaho."

On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of the
IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC,
on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations Implementing PD No.
851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from the coverage of holiday, SIL
and 13th month pay.

Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective pleadings
before the lower tribunals and even before this Court that the former had been paying the latter P700.00 each day
after the latter had finished the days task. Solano and Antonio also confirmed this fact of wage payment in their
"Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to determine the
work schedule obviously implies power of control. By having the power to control Macasios work schedule, David
could regulate Macasios work and could even refuse to give him any assignment, thereby effectively dismissing
him.
And fourth, David had the right and power to control and supervise Macasios work as to the means and methods
of performing it. In addition to setting the day and time when Macasio should report for work, the established facts
show that David rents the place where Macasio had been performing his tasks. Moreover, Macasio would leave
the workplace only after he had finished chopping all of the hog meats given to him for the days task. Also, David
would still engage Macasios services and have him report for work even during the days when only few hogs
were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe
certain rules and requirements and David would necessarily exercise some degree of control as the chopping of
the hog meats would be subject to his specifications. Also, since Macasio performed his tasks at Davids
workplace, David could easily exercise control and supervision over the former. Accordingly, whether or not David
actually exercised this right or power to control is beside the point as the law simply requires the existence of this
power to control 4243 or, as in this case, the existence of the right and opportunity to control and supervise
Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employeremployee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis.
At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was engaged or
paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual findings of labor
tribunals when supported by the established facts and in accord with the laws, especially when affirmed by the CA,
is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage payment,
is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on the task itself, in the
sense that payment is reckoned in terms of completion of the work, not in terms of the number of time spent in the
completion of work.45 Once the work or task is completed, the worker receives a fixed amount as wage, without
regard to the standard measurements of time generally used in pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to him for
chopping, Macasio would receive the fixed amount of P700.00 once he had completed his task. Clearly, these
circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the "four-fold"
test; engagement on "pakyaw" or task basis does not determine the parties relationship as it is simply a method of
pay computation. Accordingly, Macasio is Davids employee, albeit engaged on "pakyaw" or task basis.

In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section 1, Rule V
of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino Santos Transit. 46 These labor law
provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if
they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation of these
labor code provisions and the implementing rules; although, to conclude that the worker is exempted or covered
depends on the facts and in this sense, is a question of fact: first, whether Macasio is a "field personnel"; and
second, whether those engaged on "pakyaw" or task basis, but who are not "field personnel," are exempted from
the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under Rule
65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave abuse of
discretion on the part of the NLRC to deny Macasios monetary claims simply because he is paid on a non-time
basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay
(under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are paid by
results" on the other hand, are not covered by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel" as separate and distinct types of employees
who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR 47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those employed in establishments regularly employing less than
ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including those
who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly exempt, strictly
in accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL pay refer to
"field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on
holiday and SIL pay do not exclude employees "engaged on task basis" as a separate and distinct category from
employees classified as "field personnel." Rather, these employees are altogether merged into one classification
of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are
engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor Code
provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this rule may be conceded to
be within the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople 49 the phrase "those who are
engaged on task or contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that general
and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly, petitioner's
teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the
Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit
cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL
pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the general exclusion of
"workers paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is the only reasonable
interpretation since the determination of excluded workers who are paid by results from the coverage of Title I is
"determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as "field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting
Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees engaged on task or
contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall under
the classification of field personnel."51 The Court explained that the phrase "including those who are engaged on
task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III of the IRR should not be
understood as a separate classification of employees to which SIL shall not be granted. Rather, as with its
preceding phrase - "other employees whose performance is unsupervised by the employer" - the phrase "including
those who are engaged on task or contract basis" serves to amplify the interpretation of the Labor Code definition
of "field personnel" as those "whose actual hours of work in the field cannot be determined with reasonable
certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code
provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply
and solely on the mode of payment of an employee. The NLRCs utter disregard of this consistent jurisprudential
ruling is a clear act of grave abuse of discretion. 52 In other words, by dismissing Macasios complaint without
considering whether Macasio was a "field personnel" or not, the NLRC proceeded based on a significantly
incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel
from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding the payment of
holiday pay since the rule exempting "field personnel" from the grant of holiday pay is identically worded with the
rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase "employees engaged on task or
contract basis "found in the IRR on both SIL pay and holiday pay should be read together with the exemption of
"field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay, the
presence (or absence) of employer supervision as regards the workers time and performance is the key: if the
worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and
SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday pay) and Article95
(SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also falls within the
meaning of "field personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall under
the definition of "field personnel." The CAs finding in this regard is supported by the established facts of this case:
first, Macasio regularly performed his duties at Davids principal place of business; second, his actual hours of
work could be determined with reasonable certainty; and, third, David supervised his time and performance of
duties. Since Macasio cannot be considered a "field personnel," then he is not exempted from the grant of holiday,
SIL pay even as he was engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling dismissing
Macasios complaint for holiday and SIL pay for having been rendered with grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC
gravely abused its discretion in denying this benefit to Macasio.
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of
those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 851 54
enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e), "employers of
those who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations
Implementing PD No. 851 exempts employees "paid on task basis" without any reference to "field personnel." This
could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment
of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated November 22,
2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.

In September 1979, the company introduced a marketing scheme known as the "Complementary Distribution
System" (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguel's sales
offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice
of strike on the ground that the CDS was contrary to the existing marketing scheme whereby the Route Salesmen
were assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer
products from them, not from the company. It was alleged that the new marketing scheme violates Section 1,
Article IV of the collective bargaining agreement because the introduction of the CDS would reduce the take-home
pay of the salesmen and their truck helpers for the company would be unfairly competing with them.
The complaint filed by the petitioner against the respondent company raised two issues: (1) whether the CDS
violates the collective bargaining agreement, and (2) whether it is an indirect way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new
sales scheme was designed to discourage union organization or diminish its influence, but rather it is undisputable
that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the
same time gain profit to the highest. While it may be admitted that the introduction of new sales plan somewhat
disturbed the present set-up, the change however was too insignificant as to convince this Office to interpret that
the innovation interferred with the worker's right to self-organization.
Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the
plan's viability and effectiveness. It is like saying that the plan will not work out to the workers' [benefit] and
therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact
that corollary to the adoption of the assailed marketing technique is the effort of the company to compensate
whatever loss the workers may suffer because of the new plan over and above than what has been provided in the
collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any
anti-union hues. (pp. 24-25, Rollo.)
The dispositive part of the Minister's Order reads:
WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force
Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay an additional three (3)
months back adjustment commissions over and above the adjusted commission under the complementary
distribution system. (p. 26, Rollo.)
The petition has no merit.

G.R. No. L-53515 February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,
vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.
Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives:
Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment,
all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work,
tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees,
work supervision, lay-off of workers and the discipline, dismissal and recall of work. ... (NLU vs. Insular La Yebana
Co., 2 SCRA 924; Republic Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations
Law, 1985 Ed., p. 44.) (Emphasis ours.)

GRIO-AQUINO, J.:
This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor Case No.
AJML-069-79, approving the private respondent's marketing scheme, known as the "Complementary Distribution
System" (CDS) and dismissing the petitioner labor union's complaint for unfair labor practice.

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means
designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
... Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.

On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31, 1981) was
entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basic monthly
compensation plus commission based on their respective sales. (p. 6, Annex A; p. 113, Rollo.)

So long as a company's management prerogatives are exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil.
American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18
SCRA 110). San Miguel Corporation's offer to compensate the members of its sales force who will be adversely

affected by the implementation of the CDS by paying them a so-called "back adjustment commission" to make up
for the commissions they might lose as a result of the CDS proves the company's good faith and lack of intention
to bust their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.

provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the
services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for
the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the
month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of
ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment,
National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZAs talent fees and other payments due him under the Agreement.

G.R. No. 138051

June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision 2 of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals
affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement")
with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to

In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed the parties to
file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until
April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the
instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the
causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondents
plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it
the duty to prove that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers
on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The
pertinent parts of the decision read as follows:
xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it
stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as
a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he
undertook to render in accordance with his own style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant
Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered
by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for
such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the
parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these
benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages
and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but
the intent of the parties to the Agreement conferring such benefit."
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not
detract from the absence of employer-employee relationship. As held by the Supreme Court, "The line should
be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both the result and the means
to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the
case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the
NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.
(Opposition to Motion to Dismiss)

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that
MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the
same being in the nature of an action for alleged breach of contractual obligation on the part of respondentappellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for
services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the
Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount
he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations
with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning
from ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement with the station,
per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is
waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABSCBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims
being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved
by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with
the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis
supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABSCBN is a factual question that is within the jurisdiction of the NLRC to resolve. 10 A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC. 11 Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion. 12 The Court of
Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC
with its own.13

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically
referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May
1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed
the same in his capacity as President.

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING.14

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the
said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent
of Mr. Sonza.

The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly
the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents." There is no case law stating that a radio
and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN.
On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual
findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that
there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for
that of the tribunal in determining where the weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case
law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power
to control the employee on the means and methods by which the work is accomplished. 18 The last element, the socalled "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar
skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting
and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status,
ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts
that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABSCBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid
job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS,
Medicare, x x x and 13th month pay" 20 which the law automatically incorporates into every employer-employee
contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed

enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain
talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to
show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment
to prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay Sonza
shall faithfully and completely perform each condition of this Agreement." 24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees
during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not
an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee,
he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZAs letter clearly bears this out. 26 However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned
from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica
("WIPR")27 that a television program host is an independent contractor. We quote the following findings of the U.S.
court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a
masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught with
the drama department at the University of Puerto Rico; and acted in several theater and television productions
prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities"
necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry,
and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor
favors independent contractor status because WIPR provided the "equipment necessary to tape the show."
Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi
Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the show,
but these were not the primary tools that Alberty used to perform her particular function. If we accepted this
argument, independent contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with
WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi
Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x 28
(Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an

independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABSCBNs control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings. 31 ABS-CBN
could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss
in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming." 34 ABS-CBNs sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show,
ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied
with the means and methods of SONZAs performance of his work, or even with the quality or product of his work,
ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs
show but ABS-CBN must still pay his talent fees in full.35

talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are
those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of
the former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these
general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to
the services being rendered may be accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held
that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative.45

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying
in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs
work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This proves that
ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not.
In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which
ABS-CBN exercised over him.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in their
shows. Since the management did not have control over the manner of performance of the skills of the artists, it
could only control the result of the work by deleting objectionable features. 37

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice
is not designed to control the means and methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in
building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive
with the station for a commensurate period of time." 47 Normally, a much higher fee is paid to talents who agree to
work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance. 38
Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs.39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs work
as television and radio program host required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and
talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules
and standards of performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his manner of
work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABSCBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to
ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA
insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal
responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the
employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA.
The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO.

The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is
owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA
and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting.
MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally
settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no
legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot
exclude independent contractors from the class of service providers to the broadcast industry. The classification of
workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without
giving his counsel the opportunity to cross-examine these witnesses. SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of
these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding
those that may have been amicably settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal
trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat
talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating
the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an employeremployee relationship under labor laws. Not every performance of services for a fee creates an employeremployee relationship. To hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The
right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise
and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their services only as employees, the station
owners and managers can dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act No. 7716, 55 as amended by Republic
Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals
are subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under
an employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are
present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive
leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with
the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In
effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the
regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CAG.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

authority to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu
Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN employees
identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays.
They were made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of
respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager
Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However,
since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the
CBA.6

G.R. No. 164156

September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision 2 and
Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case
No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the
respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a
network of television and radio stations, whose operations revolve around the broadcast, transmission, and relay
of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and
television operations. It has a franchise as a broadcasting company, and was likewise issued a license and

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August
1, 2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled
by the studio technician. Thus, their revised schedule and other assignments would be as follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo
Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status,
Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th
Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit
their respective position papers. Upon respondents failure to file their position papers within the reglementary
period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without
prejudice for lack of interest to pursue the case. Respondents received a copy of the Order on May 16, 2001. 7
Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001,
an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For
Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted the
position paper of the complainants. Respondents made the following allegations:

1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous
period of more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995
up until the filing of this complaint on November 20, 2000.
Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto
attached as follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employees Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employees Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employees Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employees Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature.
They prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order
compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.

Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABSCBN as a condition precedent for their admission into the existing union and collective bargaining unit of
respondent company where they may as such acquire or otherwise perform their obligations thereto or enjoy the
benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises.10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the
conduct of a particular program ran by an anchor or talent. Among their duties include monitoring and receiving
incoming calls from listeners and field reporters and calls of news sources; generally, they perform leg work for the
anchors during a program or a particular production. They are considered in the industry as "program employees"
in that, as distinguished from regular or station employees, they are basically engaged by the station for a
particular or specific program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants
were issued talent information sheets which are updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on to assist. The program assignments of complainants
were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they
produce, such as drama talents in other productions. As program employees, a PAs engagement is coterminous
with the completion of the program, and may be extended/renewed provided that the program is on-going; a PA
may also be assigned to new programs upon the cancellation of one program and the commencement of another.
As such program employees, their compensation is computed on a program basis, a fixed amount for
performance services irrespective of the time consumed. At any rate, petitioner claimed, as the payroll will show,
respondents were paid all salaries and benefits due them under the law.12

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same,
especially since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were
regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants
regular employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to
pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE
HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no
jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator
as provided in Article 261 of the Labor Code.

representing their rice subsidy in the CBA, broken down as follows:

a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents
motion to refile the complaint and admit their position paper. Although respondents were not parties to the CBA
between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and
computed respondents monetary benefits based on the 1999 CBA, which was effective until September 2002.
The NLRC also ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted
in their individual capacities and not as members of the union. Their claim for monetary benefits was within the
context of Article 217(6) of the Labor Code. The validity of respondents claim does not depend upon the
interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular
employees who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in
New Pacific Timber & Supply Company v. National Labor Relations Commission. 16
Petitioner filed a motion for reconsideration, which the NLRC denied.

Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her
copy on August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed
and filed their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an
appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the
decision to the NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice
for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service
incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the
decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET
ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as
follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September
2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos
and 22/100 (P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both
procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the
appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of
the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt
of the July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the
NLRC acted without jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead
of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with
grave abuse of discretion when it awarded monetary benefits to respondents under the CBA although they are not
members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal
shall be upon the expiration of the last day to appeal by all parties, should there be several parties to a case.
Since respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who
received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their
Appeal Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is
not a ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but
regular employees who perform tasks necessary and desirable in the usual trade and business of petitioner and
not just its project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees
under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular
employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution 17 dated June
16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN
UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY
OF THE LATTERS DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC
FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC
AWARDING CBA BENEFITS TO RESPONDENTS.18

Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings
of the NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted
lapse of the reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day
period to appeal must be reckoned from receipt of a partys counsel, not from the time the party learns of the
decision, that is, notice to counsel is notice to party and not the other way around. Finally, petitioner argues that
the reopening of a complaint which the Labor Arbiter has dismissed without prejudice is a clear violation of Section
1, Rule V of the NLRC Rules; such order of dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely
appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late,
it may still be given due course in the interest of substantial justice as an exception to the general rule that the
negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that
this is not a ground to strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is
not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and
deprives the appellate court or body of the legal authority to alter the final judgment, much less entertain the
appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given
due course if greater injustice may occur if an appeal is not given due course than if the reglementary period to
appeal were strictly followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing
order and efficiency if only to serve the greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor
Code a liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the
way of equitably and completely resolving the rights and obligations of the parties. 22 We have held in a catena of
cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be
detrimental to the workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary
period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of
November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the
NLRC can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be
of greater benefit to both parties.24
We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted
respondents position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated
by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process.25 Indeed, as stressed by the appellate court,
respondents failure to submit a position paper on time is not a ground for striking out the paper from the records,
much less for dismissing a complaint. 26 Likewise, there is simply no truth to petitioners assertion that it was denied
due process when the Labor Arbiter admitted respondents position paper without requiring it to file a comment
before admitting said position paper. The essence of due process in administrative proceedings is simply an
opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling complained of.
Obviously, there is nothing in the records that would suggest that petitioner had absolute lack of opportunity to be
heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiters admission of respondents
position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be
stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by
unscrupulous employers of the employees right to security of tenure by indiscriminately and absolutely ruling out
all written and oral agreements inharmonious with the concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June

2001 as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process.
That while suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case,
respondents impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so,
respondents suggestion acknowledges complainants right to prosecute this case, albeit with the burden of
repeating the same procedure, thus, entailing additional time, efforts, litigation cost and precious time for the
Arbiter to repeat the same process twice. Respondents suggestion, betrays its notion of prolonging, rather than
promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case
without prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule
V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days
from receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in
the arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be
refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts
of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its
members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which
were belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of
law or procedure, all in the interest of due process. Indeed, the failure to submit a position paper on time is not a
ground for striking out the paper from the records, much less for dismissing a complaint in the case of the
complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees,
G.R. No. 144702, July 31, 2001).
"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively,
without technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents
had filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the
parties are given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence,
not regular employees of the broadcasting company. Petitioners claim that the functions performed by the
respondents are not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on
record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if
they coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by
substantial evidence.30 The question of whether respondents are regular or project employees or independent
contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its
tremendous effects to the legions of production assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least one year of service, regardless
of the nature of the activity performed, or where the work is continuous or intermittent, the employment is
considered regular as long as the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor
Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary

notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment is for the
duration of the season.
In Universal Robina Corporation v. Catapang, 31 the Court reiterated the test in determining whether one is a
regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year,
even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need
for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business.
Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. 32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment
should be considered regular or non-regular, the applicable test is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. The
standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual
business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered
and its relation to the general scheme under which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the
particular business or trade. But, although the work to be performed is only for a specific project or seasonal,
where a person thus engaged has been performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and continuing need for its performance as being
sufficient to indicate the necessity or desirability of that activity to the business or trade of the employer. The
employment of such person is also then deemed to be regular with respect to such activity and while such activity
exists.34
Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction
project, and "seasonal employees" whose employment by its nature is only desirable for a limited period of time.
Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is
deemed regular with respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed
"talent fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to
join other productions during their free time are not conclusive of the nature of their employment. Respondents
cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or
utility employees. They are regular employees who perform several different duties under the control and direction
of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are
employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining
situation necessitates the succor of the State. What determines whether a certain employment is regular or
otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces, much less the
procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the
character of the activities performed in relation to the particular trade or business taking into account all the
circumstances, and in some cases the length of time of its performance and its continued existence. 36 It is obvious

that one year after they were employed by petitioner, respondents became regular employees by operation of
law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was
presented to show that the duration and scope of the project were determined or specified at the time of their
engagement. Under existing jurisprudence, project could refer to two distinguishable types of activities. First, a
project may refer to a particular job or undertaking that is within the regular or usual business of the employer, but
which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. Second, the term project may also refer to a
particular job or undertaking that is not within the regular business of the employer. Such a job or undertaking
must also be identifiably separate and distinct from the ordinary or regular business operations of the employer.
The job or undertaking also begins and ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or
undertaking, the duration and scope of which were specified at the time the employees were engaged for that
project.39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of
five years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The
persisting need for their services is sufficient evidence of the necessity and indispensability of such services to
petitioners business or trade.40 While length of time may not be a sole controlling test for project employment, it
can be a strong factor to determine whether the employee was hired for a specific undertaking or in fact tasked to
perform functions which are vital, necessary and indispensable to the usual trade or business of the employer.41
We note further that petitioner did not report the termination of respondents employment in the particular "project"
to the Department of Labor and Employment Regional Office having jurisdiction over the workplace within 30 days
following the date of their separation from work, using the prescribed form on employees termination/
dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier
pleadings, petitioner classified respondents as program employees, and in later pleadings, independent
contractors. Program employees, or project employees, are different from independent contractors because in the
case of the latter, no employer-employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation 43 is misplaced. In
that case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent
contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS peculiar
skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting
and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status,
ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts
that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABSCBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid
job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS,
Medicare, x x x and 13th month pay which the law automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAS unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed
enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain
talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement. 44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been
proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was
required from them because they were merely hired through petitioners personnel department just like any
ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employeremployee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance
negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are
highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors
negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when
the worker, relative to the employer, does not furnish an independent business or professional service, such work
is a regular employment of such employee and not an independent contractor. 45 The Court will peruse beyond any
such agreement to examine the facts that typify the parties actual relationship.46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and
its rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other
regular employees of petitioner under the CBA. 47 We quote with approval the ruling of the appellate court, that the
reason why production assistants were excluded from the CBA is precisely because they were erroneously
classified and treated as project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN
under the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as
production assistants of petitioner are regular employees. The monetary award is not considered as claims
involving the interpretation or implementation of the collective bargaining agreement. The reason why production
assistants were excluded from the said agreement is precisely because they were classified and treated as project
employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an
employee but the nature of the activities performed by such employee in relation to the particular business or trade
of the employer. Considering that We have clearly found that private respondents are regular employees of
petitioner, their exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they

are project employees, is therefore not proper. Finding said private respondents as regular employees and not as
mere project employees, they must be accorded the benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the
employer. However, even the non-member employees are entitled to the benefits of the contract. To accord its
benefits only to members of the union without any valid reason would constitute undue discrimination against nonmembers. A collective bargaining agreement is binding on all employees of the company. Therefore, whatever
benefits are given to the other employees of ABS-CBN must likewise be accorded to private respondents who
were regular employees of petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees
of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and
all labor contracts shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.

xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note "what terms and
conditions" in response to my first letter dated October 13, 1999. To date, or for more than fifteen (15) days since
then, I have not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday, November 8, 1999, I will deem it
as a constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter 7 to ABC, demanding: (a) reinstatement to her former position; (b)
payment of unpaid wages for services rendered from September 1 to October 20, 1999 and full backwages; (c)
payment of 13th month pay, vacation/sick/service incentive leaves and other monetary benefits due to a regular
employee starting March 31, 1996. ABC replied that a check covering petitioners talent fees for September 16 to
October 20, 1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or
in law.
On December 20, 1999, petitioner filed a complaint 8 against ABC, Mr. Javier and Mr. Edward Tan, for illegal
constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay, service
incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-99. She
likewise demanded payment for moral, exemplary and actual damages, as well as for attorneys fees.
The parties agreed to submit the case for resolution after settlement failed during the mandatory
conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.9
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an
employer-employee relationship existed between petitioner and ABC; that the subject talent contract was void; that
the petitioner was a regular employee illegally dismissed; and that she was entitled to reinstatement and
backwages or separation pay, aside from 13th month pay and service incentive leave pay, moral and exemplary
damages and attorneys fees. It held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET ASIDE and a NEW
ONE promulgated:

G.R. No. 164652

June 8, 2007
THELMA DUMPIT-MURILLO, petitioner,
vs.
COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD TAN,
respondents.
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision 1 dated January 30, 2004 of the Court of Appeals in
CA-G.R. SP No. 63125 and its Resolution 2 dated June 23, 2004 denying the motion for reconsideration. The Court
of Appeals had overturned the Resolution 3 dated August 30, 2000 of the National Labor Relations Commission
(NLRC) ruling that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805, 4 private respondent Associated Broadcasting
Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an
early evening news program. The contract was for a period of three months. It was renewed under Talent
Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649. 5 In addition, petitioners services were
engaged for the program "Live on Five." On September 30, 1999, after four years of repeated renewals,
petitioners talent contract expired. Two weeks after the expiration of the last contract, petitioner sent a letter to Mr.
Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter that she was still interested in
renewing her contract subject to a salary increase. Thereafter, petitioner stopped reporting for work. On November
5, 1999, she wrote Mr. Javier another letter,6 which we quote verbatim:

1) declaring respondents to have illegally dismissed complainant from her regular work therein and thus, ordering
them to reinstate her in her former position without loss of seniority right[s] and other privileges and to pay her full
backwages, inclusive of allowances and other benefits, including 13th month pay based on her said latest rate of
P28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to finality hereof, or at complainants
option, to pay her separation pay of one (1) month pay per year of service based on said latest monthly rate,
reckoned from date of hire on 30 September 1995 until finality hereof;
2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and 13th month pay
for the years 1999, 1998 and 1997 of P19,236.00 and P84,000.00, respectively and her accrued salary from 16
September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12% from date of judicial demand on 20
December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary damages of P350,000.00 and 10% of the total
of the adjudged monetary awards as attorneys fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.10
After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for
certiorari under Rule 65. The petition was first dismissed for failure to attach particular documents, 11 but was
reinstated on grounds of the higher interest of justice.12
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the
decision of the NLRC.13 The appellate court reasoned that petitioner should not be allowed to renege from the
stipulations she had voluntarily and knowingly executed by invoking the security of tenure under the Labor Code.
According to the appellate court, petitioner was a fixed-term employee and not a regular employee within the
ambit of Article 28014 of the Labor Code because her job, as anticipated and agreed upon, was only for a specified
time.15

Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS, THE
DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC FIRST DIVISION, ARE
"ANTI-REGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC
POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH TALENT
CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER
ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE WAS A
DENIAL OF PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS
STATED IN THE COMPLAINT[.]16
The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals;
and (2) whether or not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its
Decision.
On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and
that there is no showing that the said issues have been resolved arbitrarily and without basis. They add that the
findings of the Court of Appeals are supported by overwhelming wealth of evidence on record as well as prevailing
jurisprudence on the matter.17
Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate
court erred in deciding a question of substance in a way which is not in accord with law or with applicable
decisions of this Court.18
We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case regardless of
the nature of the action or proceeding involved may be appealed to this Court through a petition for review. This
remedy is a continuation of the appellate process over the original case, 19 and considering there is no congruence
in the findings of the NLRC and the Court of Appeals regarding the status of employment of petitioner, an
exception to the general rule that this Court is bound by the findings of facts of the appellate court, 20 we can review
such findings.
On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity
of the talent contracts voluntarily entered into by petitioner. It further stated that prevailing jurisprudence has
recognized and sustained the absence of employer-employee relationship between a talent and the media entity
which engaged the talents services on a per talent contract basis, citing the case of Sonza v. ABS-CBN
Broadcasting Corporation.21
Petitioner avers however that an employer-employee relationship was created when the private respondents
started to merely renew the contracts repeatedly fifteen times or for four consecutive years. 22
Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a
fixed-term employee. Petitioner was a regular employee under contemplation of law. The practice of having fixedterm contracts in the industry does not automatically make all talent contracts valid and compliant with labor law.
The assertion that a talent contract exists does not necessarily prevent a regular employment status.23
Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his
job. How Sonza delivered his lines, appeared on television, and sounded on radio were outside the television
stations control. Sonza had a free hand on what to say or discuss in his shows provided he did not attack the
television station or its interests. Clearly, the television station did not exercise control over the means and
methods of the performance of Sonzas work.24 In the case at bar, ABC had control over the performance of

petitioners work. Noteworthy too, is the comparatively low P28,000 monthly pay of petitioner25 vis the P300,000 a
month salary of Sonza,26 that all the more bolsters the conclusion that petitioner was not in the same situation as
Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxxx
1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention and best efforts in the
performance of his/her duties and responsibilities as Anchor/Program Host/Newscaster of the Program, in
accordance with the direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews on- and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live telecasts;
g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of
the Program; and
j. Perform such other functions as may be assigned to him/her from time to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS TALENT
agrees that he/she will promptly and faithfully comply with the requests and instructions, as well as the program
standards, policies, rules and regulations of ABC, the KBP and the government or any of its agencies and
instrumentalities.27
xxxx
In Manila Water Company, Inc. v. Pena,28 we said that the elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee, (b) the payment of wages, (c) the power of
dismissal, and (d) the employers power to control. The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.29
The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of
petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioners wages. ABC
also had power to dismiss her. All these being present, clearly, there existed an employment relationship between
petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely: (1) those who are engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and
(2) those who have rendered at least one year of service, whether continuous or broken, with respect to the
activity in which they are employed.30 In other words, regular status arises from either the nature of work of the
employee or the duration of his employment.31 In Benares v. Pancho,32 we very succinctly said:
[T]he primary standard for determining regular employment is the reasonable connection between the particular
activity performed by the employee vis--vis the usual trade or business of the employer. This connection can be
determined by considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. If the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence,
the employment is considered regular, but only with respect to such activity and while such activity exists. 33
In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the
description of the scope of services aforementioned, petitioners work was necessary or desirable in the usual
business or trade of the employer which includes, as a pre-condition for its enfranchisement, its participation in the
governments news and public information dissemination. In addition, her work was continuous for a period of four
years. This repeated engagement under contract of hire is indicative of the necessity and desirability of the
petitioners work in private respondent ABCs business.34

The contention of the appellate court that the contract was characterized by a valid fixed-period employment is
untenable. For such contract to be valid, it should be shown that the fixed period was knowingly and voluntarily
agreed upon by the parties. There should have been no force, duress or improper pressure brought to bear upon
the employee; neither should there be any other circumstance that vitiates the employees consent. 35 It should
satisfactorily appear that the employer and the employee dealt with each other on more or less equal terms with
no moral dominance being exercised by the employer over the employee. 36 Moreover, fixed-term employment will
not be considered valid where, from the circumstances, it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee.37
In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms.
Understandably, the petitioner could not object to the terms of her employment contract because she did not want
to lose the job that she loved and the workplace that she had grown accustomed to, 38 which is exactly what
happened when she finally manifested her intention to negotiate. Being one of the numerous
newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting practitioner, petitioner was left
with no choice but to affix her signature of conformity on each renewal of her contract as already prepared by
private respondents; otherwise, private respondents would have simply refused to renew her contract. Patently,
the petitioner occupied a position of weakness vis--vis the employer. Moreover, private respondents practice of
repeatedly extending petitioners 3-month contract for four years is a circumvention of the acquisition of regular
status. Hence, there was no valid fixed-term employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has
consistently emphasized that when the circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs,
public order or public policy.39
As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and
after due compliance with procedural due process. Since private respondents did not observe due process in
constructively dismissing the petitioner, we hold that there was an illegal dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court
of Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a fixed-term employee, are REVERSED
and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents. SO ORDERED.
G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as
defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the
managerial staff under Article 82, Book III of the same Code, and hence are not entitled to overtime rest day and
holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The
Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union
represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the Technical Assistant
to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst, General
Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift
Operations Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and Security Officer,
Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory Control Section,
Shift Process Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-andfile to department heads. The JE Program was designed to rationalized the duties and functions of all positions,
reestablish levels of responsibility, and recognize both wage and operational structures. Jobs were ranked
according to effort, responsibility, training and working conditions and relative worth of the job. As a result, all
positions were re-evaluated, and all employees including the members of respondent union were granted salary
adjustments and increases in benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the members of respondent union
were treated in the same manner as rank-and file employees. As such, they used to be paid overtime, rest day
and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the
implementation of the JE Program, the following adjustments were made: (1) the members of respondent union
were re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation
and benefits; (2) there was an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the
highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they
were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for
rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to
Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining representative
of all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive labor arbiter for non-payment of overtime, rest day and
holiday pay allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to
1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed
by them instead of the P100.00 special allowance which was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value between the P100.00 special
allowance and the overtime pay, rest day pay and holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along span of time during which the
benefits were being paid to the supervisors has accused the payment thereof to ripen into contractual obligation;
at the complainants cannot be estopped from questioning the validity of the new compensation package despite
the fact that they have been receiving the benefits therefrom, considering that respondent union was formed only
a year after the implementation of the Job Evaluation Program, hence there was no way for the individual
supervisors to express their collective response thereto prior to the formation of the union; and the comparative
computations presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay and holiday
pay not been discontinued, which arrangement, therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations
Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of respondent
union are not managerial employees, as defined under Article 212 (m) of the Labor Code and, therefore, they are
entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory employees are
merely exercising recommendatory powers subject to the evaluation, review and final action by their department
heads; their responsibilities do not require the exercise of discretion and independent judgment; they do not
participate in the formulation of management policies nor in the hiring or firing of employees; and their main
function is to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was
denied in a resolution of public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission
committed a grave abuse of discretion in refusing to recognized the fact that the members of respondent union are
members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making
petitioner assume the "double burden" of giving the benefits due to rank-and-file employees together with those

due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime,
rest day and holiday pay. Before this can be resolved, however it must of necessity be ascertained first whether or
not the union members, as supervisory employees, are to be considered as officers or members of the managerial
staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined employees, as
defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer effectively recommend such managerial
actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of those above definitions are considered rank-and-file
employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in
ruling that the latter are not managerial employees, adopted the definition stated in the aforequoted statutory
provision.
Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are
entitled to overtime, rest day and holiday pay, said employees should be considered as "officers or members of
the managerial staff" as defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest
Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor in Appropriate
regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following persons if they qualify for
exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of other
employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their
employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the
management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii)
execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly
and closely related to the performance of the work described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as supervisors, may not be

occupying managerial positions, they are clearly officers or members of the managerial staff because they meet all
the conditions prescribed by law and, hence, they are not entitled to overtime, rest day and supervisory employees
under Article 212 (m) should be made to apply only to the provisions on Labor Relations, while the right of said
employees to the questioned benefits should be considered in the light of the meaning of a managerial employee
and of the officers or members of the managerial staff, as contemplated under Article 82 of the Code and Section
2, Rule I Book III of the implementing rules. In other words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union members are supervisory employees. In terms of working
conditions and rest periods and entitlement to the questioned benefits, however, they are officers or members of
the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its
own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, this Court has inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that
justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable
law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the
circumstances of the particular case, In determining whether an employee is within the terms of the statutes, the
criterion is the character of the work performed, rather than the title of the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual findings of respondent commission,
substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these
supervisory employees are under the direct supervision of their respective department superintendents and that
generally they assist the latter in planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory employees are likewise
responsible for the effective and efficient operation of their respective departments. More specifically, their duties
and functions include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled and
manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department when appointed and authorized by the former;
6) coordinates and communicates with other inter and intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service and working
conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed necessary, and
initiates and prepares reports for any observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are properly
implemented; and
11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities
which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I Book
III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of
work directly related to management policies of their employer; (2) they customarily and regularly exercise
discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose
primary duty consist of the management of a department of the establishment in which they are employed (4) they
execute, under general supervision, work along specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6)
they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should
be considered as officers and members of the managerial staff and are, therefore, exempt from the coverage of
Article 82. Perforce, they are not entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union members are managerial
employees, to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is
admitted that these union members are supervisory employees and this is one instance where the nomenclatures
or titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a managerial
employee, as defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The
controversy actually involved here seeks a determination of whether or not these supervisory employees ought to
be considered as officers or members of the managerial staff. The distinction, therefore, should have been made
along that line and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to
the union members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-andfile employees such as overtime, rest day and holiday pay, simply because they were treated in the same manner
as rank-and-file employees, and their basic pay was nearly on the same level as those of the latter, aside from the
fact that their specific functions and duties then as supervisors had not been properly defined and delineated from
those of the rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for
reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991,
wherein, it lucidly explained:]
"But, complainants no longer occupy the same positions they held before the JE Program. Those positions
formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly and
continue to receive overtime, holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in
most cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after the
JE program, complainants cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by respondent union in any of
its pleadings filed before herein public respondent or with this Court. Hence, it can be safely concluded therefrom
that the members of respondent union were paid the questioned benefits for the reason that, at that time, they
were rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as members or
officers of the managerial staff considering that they were then treated merely on the same level as rank-and-file.
Consequently, the payment thereof could not be construed as constitutive of voluntary employer practice, which
cannot be now be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced
over a long period of time, and must be shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowingly fully well that said employees are not covered by the law requiring payment
thereof. 11 In the case at bar, respondent union failed to sufficiently establish that petitioner has been motivated or
is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private respondent union
were re-classified under levels S-5 S-8 which were considered under the program as managerial staff purposes of
compensation and benefits, that they occupied re-evaluated positions, and that their basic pay was increased by
an average of 50% of their basic salary prior to the JE Program. In other words, after the JE Program there was an
ascent in position, rank and salary. This in essence is a promotion which is defined as the advancement from one
position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied
by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach
and pertain exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance
with the conditions set forth therein. With the promotion of the members of respondent union, they occupied
positions which no longer met the requirements imposed by law. Their assumption of these positions removed
them from the coverage of the law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which
attach to their former positions, there was nothing to prevent them from refusing to accept their promotions and
their corresponding benefits. As the sating goes by, they cannot have their cake and eat it too or, as petitioner
suggests, they could not, as a simple matter of law and fairness, get the best of both worlds at the expense of
NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management,
provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince this
Court that the petitioner acted implementing the JE Program. There is no showing that the JE Program was
intended to circumvent the law and deprive the members of respondent union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the judgment
of the employer in the conduct of its business. Such management prerogative may be availed of without fear of
any liability so long as it is exercised in good faith for the advancement of the employer's interest and not for the
purpose of defeating on circumventing the rights of employees under special laws or valid agreement and are not
exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission
promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for
having been rendered and adopted with grave abuse of discretion, and the basic complaint of private respondent
union is DISMISSED.

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of
salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to
as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of
overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo,
pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code,
that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251
as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay
award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that
the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled
that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the
reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251
days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the
two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987
remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in
voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa
Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning
that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1,
1986.

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES, INC.
(formerly FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the
divisor in the computation of benefits from 251 to 261 days.

Hence, this petition.

The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days
and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential,
vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code.
The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "nonagritultural employees who regularly perform their duties away from the principal place of business or branch office
of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor
Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations
respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered
Bank Employees Association v. Ople (138 SCRA 273 [1985]).

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's
working hours which can be determined with reasonable certainty.

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained.
The company has no way of determining whether or not these sales personnel, even if they report to the office
before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field
work.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and
limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo,
p. 31)

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00
a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an

exercise of purely management prerogative of providing administrative control over such personnel. This does not
in any manner provide a reasonable level of determination on the actual field work of the employees which can be
reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly
report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their
field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel
follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The
period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and
result of which are subject to their individual capacity and industry and which "cannot be determined with
reasonable certainty." This is the reason why effective supervision over field work of salesmen and medical
representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently, they are
excluded from the ten holidays with pay award. (Rollo, pp. 36-37)

individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within
the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to the personal supervision of
his employer, and his employer has no way of knowing the number of hours he works per day.

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty"
must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates
the basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is
no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the concept of "solutio indebti."

Rule IV Holidays with Pay

Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . .
(Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The
petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of
the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised
by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in
the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of
Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in
the field can be determined with reasonable certainty, query must be made as to whether or not such employee's
time and performance is constantly supervised by the employer.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for
their exclusion as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay,
the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees
should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon
that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with
additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for
purposes of computing overtime and night time services and considering sick and vacation leave credits.
Therefore, reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award
of ten holidays with pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly
paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in
Chartered Bank Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy instruction, the company practice
indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by
law. The petitioner contends otherwise.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and
performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of
the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a
year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an
employee through the imposition of sanctions on absenteeism contained in the company circular of March 15,
1984.

monthly rate x 12 months

251 days

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on
their performance is proof that their actual hours of work in the field can be determined with reasonable certainty.
The Court thinks otherwise.

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro
indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for
the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2)
good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5)
minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the
difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their work
and not by the actual hours of field work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to
discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d
202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate
which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior
to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his
daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and
totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in
respondent Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and
after the grant of holiday pay.

pp. 434-435)
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor
must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to
September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was
303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on
September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late
to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1,
1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it.
Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the
holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief
where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of
the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA
331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394
[1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this case
may not be needlessly delayed by another petition, the Court resolved to take up the matter of effectivity of the
holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered
Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity
of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975
now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this
case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit
validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not
obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the
fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it
would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984
was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing
holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all
other respects, the order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter
referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976,
respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court
therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned
implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The Chartered
Bank case reiterated the above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA
case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be
given to a legislative or executive act subsequently declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act
must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is
now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is
merely to reflect awareness that precisely because the judiciary is the government organ which has the final say
on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to particular relations, individual and
corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308
US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002
[1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is
the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At

employees who work up to late at night.

2. As to employees who work at night, Judge Bautista decreed that they be paid their corresponding salary
differentials for work done at night prior to January 1, 1949 with the present qualification: 25% on the basis of their
salary to those who work from 6:00 to 12:00 p.m., and 75% to those who work from 12:01 to 6:00 in the morning.
3. With regard to work done during Sundays and holidays, Judge Bautista also decreed that the employees
concerned be paid an additional compensation of 25% as provided for in Commonwealth Act No. 444 even if they
had been paid a compensation on monthly salary basis.
The demands for the application of the Minimum Wage Law to workers paid on "pakiao" basis, payment of
accumulated vacation and sick leave and attorney's fees, as well as the award of additional separation pay, were
either dismissed, denied, or set aside.
Its motion for reconsideration having been denied by the industrial court en banc, which affirmed the decision of
the court a quo with few exceptions, the San Miguel Brewery, Inc. interposed the present petition for review.
Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations, to the effect that outside or
field sales personnel are entitled to the benefits of the Eight-Hour Labor Law, the pertinent facts are as follows:
After the morning roll call, the employees leave the plant of the company to go on their respective sales routes
either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer trucks. They do not have a daily time record. The
company never require them to start their work as outside sales personnel earlier than the above schedule.
The sales routes are so planned that they can be completed within 8 hours at most, or that the employees could
make their sales on their routes within such number of hours variable in the sense that sometimes they can be
completed in less than 8 hours, sometimes 6 to 7 hours, or more. The moment these outside or field employees
leave the plant and while in their sales routes they are on their own, and often times when the sales are
completed, or when making short trip deliveries only, they go back to the plant, load again, and make another
round of sales. These employees receive monthly salaries and sales commissions in variable amounts. The
amount of compensation they receive is uncertain depending upon their individual efforts or industry. Besides the
monthly salary, they are paid sales commission that range from P30, P40, sometimes P60, P70, to sometimes
P90, P100 and P109 a month, at the rate of P0.01 to P0.01- per case.
G.R. No. L-18353
July 31, 1963
SAN MIGUEL BREWERY, INC., petitioner,
vs.
DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
Paredes, Poblador, Cruz and Nazareno for petitioner.Delfin N. Mercader for respondents.
BAUTISTA ANGELO, J.:
On January 27, 1955, the Democratic Labor Association filed complaint against the San Miguel Brewery, Inc.
embodying 12 demands for the betterment of the conditions of employment of its members. The company filed its
answer to the complaint specifically denying its material averments and answering the demands point by point.
The company asked for the dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its desire to confine its claim to its
demands for overtime, night-shift differential pay, and attorney's fees, although it was allowed to present evidence
on service rendered during Sundays and holidays, or on its claim for additional separation pay and sick and
vacation leave compensation.
After the case had been submitted for decision, Presiding Judge Jose S. Bautista, who was commissioned to
receive the evidence, rendered decision expressing his disposition with regard to the points embodied in the
complaint on which evidence was presented. Specifically, the disposition insofar as those points covered by this
petition for review are concerned, is as follows:
1. With regard to overtime compensation, Judge Bautista held that the provisions of the Eight-Hour Labor Law
apply to the employees concerned for those working in the field or engaged in the sale of the company's products
outside its premises and consequently they should be paid the extra compensation accorded them by said law in
addition to the monthly salary and commission earned by them, regardless of the meal allowance given to

It is contended that since the employees concerned are paid a commission on the sales they make outside of the
required 8 hours besides the fixed salary that is paid to them, the Court of Industrial Relations erred in ordering
that they be paid an overtime compensation as required by the Eight-Hour Labor Law for the reason that the
commission they are paid already takes the place of such overtime compensation. Indeed, it is claimed, overtime
compensation is an additional pay for work or services rendered in excess of 8 hours a day by an employee, and if
the employee is already given extra compensation for labor performed in excess of 8 hours a day, he is not
covered by the law. His situation, the company contends, can be likened to an employee who is paid on piecework, "pakiao", or commission basis, which is expressly excluded from the operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only has application where an
employee or laborer is paid on a monthly or daily basis, or is paid a monthly or daily compensation, in which case,
if he is made to work beyond the requisite period of 8 hours, he should be paid the additional compensation
prescribed by law. This law has no application when the employee or laborer is paid on a piece-work, "pakiao", or
commission basis, regardless of the time employed. The philosophy behind this exemption is that his earnings in
the form of commission based on the gross receipts of the day. His participation depends upon his industry so that
the more hours he employs in the work the greater are his gross returns and the higher his commission. This
philosophy is better explained in Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly apparent. Such salesman, to a greater extent, works
individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within
the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to the personal supervision of
his employer, and his employer has no way of knowing the number of hours he works per day.
True it is that the employees concerned are paid a fixed salary for their month of service, such as Benjamin
Sevilla, a salesman, P215; Mariano Ruedas, a truck driver, P155; Alberto Alpaza and Alejandro Empleo, truck
helpers, P125 each, and sometimes they work in excess of the required 8-hour period of work, but for their extra

work they are paid a commission which is in lieu of the extra compensation to which they are entitled. The record
shows that these employees during the period of their employment were paid sales commission ranging from P30,
P40, sometimes P60, P70, to sometimes P90, P100 and P109 a month depending on the volume of their sales
and their rate of commission per case. And so, insofar is the extra work they perform, they can be considered as
employees paid on piece work, "pakiao", or commission basis. The Department of Labor, called upon to
implement, the Eight-Hour Labor Law, is of this opinion when on December 9, 1957 it made the ruling on a query
submitted to it, thru the Director of the Bureau of Labor Standards, to the effect that field sales personnel receiving
regular monthly salaries, plus commission, are not subject to the Eight-Hour Labor Law. Thus, on this point, said
official stated:
. . . Moreover, when a fieldman receives a regular monthly salary plus commission on percentage basis of his
sales, it is also the established policy of the Office to consider his commission as payment for the extra time he
renders in excess of eight hours, thereby classifying him as if he were on piecework basis, and therefore,
technically speaking, he is not subject to the Eight-Hour Labor Law.
We are, therefore, of the opinion that the industrial court erred in holding that the Eight-Hour Labor Law applies to
the employees composing the outside service force and in ordering that they be paid the corresponding additional
compensation.
With regard to the claim for night salary differentials, the industrial court found that claimants Magno Johnson and
Jose Sanchez worked with the respondent company during the period specified by them in their testimony and
that watchmen Zoilo Illiga, Inocentes Prescillas and Daniel Cayuca rendered night duties once every three weeks
continuously during the period of the employment and that they were never given any additional compensation
aside from their monthly regular salaries. The court found that the company started paying night differentials only
in January, 1949 but never before that time. And so it ordered that the employees concerned be paid 25%
additional compensation for those who worked from 6:00 to 12:00 p.m. and 75% additional compensation for
those who worked from 12:01 to 6: 00 in the morning. It is now contended that this ruling is erroneous because an
award for night shift differentials cannot be given retroactive effect but can only be entertained from the date of
demand which was on January 27, 1953, citing in support thereof our ruling in Earnshaws Docks & Honolulu Iron
Works v. The Court of Industrial Relations, et al., L-8896, January 25, 1957.
This ruling, however, has no application here for it appears that before the filing of the petition concerning this
claim a similar one had already been filed long ago which had been the subject of negotiations between the union
and the company which culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the
strikers were ordered to return to work with the understanding that the claim for night salary differentials should be
settled in court. It is perhaps for this reason that the court a quo granted this claim in spite of the objection of the
company to the contrary.
The remaining point to be determined refers to the claim for pay for Sundays and holidays for service performed
by some claimants who were watchmen or security guards. It is contended that these employees are not entitled
to extra pay for work done during these days because they are paid on a monthly basis and are given one day off
which may take the place of the work they may perform either on Sunday or any holiday.
We disagree with this claim because it runs counter to law. Section 4 of Commonwealth Act No. 444 expressly
provides that no person, firm or corporation may compel an employee or laborer to work during Sundays and legal
holidays unless he is paid an additional sum of 25% of his regular compensation. This proviso is mandatory,
regardless of the nature of compensation. The only exception is with regard to public utilities who perform some
public service.
WHEREFORE, the decision of the industrial court is hereby modified as follows: the award with regard to extra
work performed by those employed in the outside or field sales force is set aside. The rest of the decision insofar
as work performed on Sundays and holidays covering watchmen and security guards, as well as the award for
night salary differentials, is affirmed. No costs.

In its Resolution 8 of 22 October 1992, the NLRC granted petitioner's appeal and remanded the case to Labor
Arbiter Juanon for appropriate proceedings. Upon petitioner's motion, Labor Arbiter Juanon inhibited himself from
the case. 9 As such, the case was ultimately reassigned to Labor Arbiter Rodolfo G. Lagoc.
In his decision 10 of 15 February 1994, Labor Arbiter Lagoc found that petitioner was an employee of private
respondent and was illegally dismissed from the service, hence entitled to separation pay, but rejected the charge
of unfair labor practice and dismissed, for lack of merit, petitioner's other monetary claims. The dispositive portion
of the decision read as follows:
WHEREFORE, premises considered judgment is rendered as follows:
Respondent Emmanuel Lo is hereby ordered to pay complainant the amount [of] P4,628.00 representing his
separation pay.
All other claims are hereby dismissed.
SO ORDERED.

G.R. No. 121288 November 20, 1998

ROLANDO DELA CRUZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL LO, respondents.
DAVIDE, JR. J.:
In this special civil action certiorari under Rule 65 of the Rules of Court, petitioner seeks to set aside, on ground of
grave abuse of discretion, the Decision 1 of 17 March 1995 of the National Labor Relations Commission (NLRC) in
NLRC Case No. V-0254-92 (RAB-06-09-50298-91) and its Resolution 2 of 19 May 1995 denying the motion for
reconsideration. The former affirmed the 15 February 1994 Decision 3 of Labor Arbiter Rodolfo G. Lagoc ordering
private respondent Emmanuel Lo to pay petitioner separation pay but dismissing all other claims of petitioner.
In a complaint 4 filed on 5 September 1991 before Sub-Regional Arbitration Branch No. 6 of the NLRC, situated in
Iloilo City, petitioner charged private respondent Emmanuel Lo with unfair labor practice, illegal dismissal,
underpayment of salary, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day,
and non-payment of wages or commission and separation pay. The case was docketed as SRAB Case No. 06-0950298-91.
Private respondent filed his Answer 5 on 9 October 1991. Petitioner and private respondent then filed their position
paper 6 on 4 November 1991 and 21 November 1991, respectively.
On 7 August 1992, after appropriate proceedings, Labor Arbiter Dennis D. Juanon rendered a decision 7
dismissing the complaint for lack of merit due to the absence of an employer-employee relationship between
petitioner and private respondent.
Petitioner seasonably appealed to the NLRC on 9 September 1992. The appeal was docketed as NLRC Case No.
V-0254-92 (RAB-06-09-50298-91).

Labor Arbiter Lagoc summarized the factual contentions of the parties, thus:
Complainant [petitioner herein] alleged in his position paper that he started working with respondent Emmanuel Lo
in June 1988 as ordinary crew and received wages in cash from the share of the catch of the fishing boat of said
respondent; that on January 1989, the complainant was promoted to light boat operator and the wages was [ sic]
increased from one (1) share as a crew [member] to five (5) shares; that in March 1989 the complainant was again
promoted to "secondo patron" with fixed salary of P200.00 in addition to five (5) shares of the catch and P1.00/fish
box commission; that in November 1989, complainant because a full-pledged patron (Captain of respondent's
fishing boat known as M/DCA "Sheenly Joy 1"); that as Captain, the complainant received a monthly salary of
P450.00 and ten (10) shares of the fish catch plus P2.00/fish box commission; that on December 2, 1990, the
undersigned complainant was dismissed by the respondent Emmanuel Lo illegally and unlawfully without notice
and separation pay; that on December 13, 1990, the complainant came to the office of the undersigned counsel
and the latter wrote respondent a letter of demand; that in 1988, when the complainant was employed by the
respondent, the latter owned one fishing boat and when the complainant was dismissed in 1990, the respondent
had increased his fishing boat to three (3) boats out of his profit from his first; that each of the respondent's fishing
boat[s] went fishing for 22-23 days every month and all the fish catched [ sic] on these days were sold everyday
and the cash proceeds were kept by the respondent; that at the end of every 22-23 days of fishing, the fishing
boat was cleaned by the crew, engine, net and light boat were repaired by the crew, helped and managed by the
officers including the complainant; that these cleaning and repair [sic] were charged to the gross income of the
month; that the monthly income of the crew would not be given unless these cleaning and repair [sic] were all
done; that the system of sharing of the monthly income of the fishing boat was done by the respondent in the
following manner:
1. From the monthly gross income, the respondent [would] deduct 25% for maintenance;
2. After deducting the 25%, the respondent and the officers/crew got 10% each (total 20%) from the remaining
75% of the gross, known as "sideline"; the officers/crew (about 24 men) share[d] the sideline (10%) as follows:
a. Captain 10 shares
b. Engineer 8 shares
c. Secondo Captain 8 shares
d. Encargado 8 shares
e. Light Boat Chief 6 shares
f. Secondo Chief 5 shares
g. Chief Lambatero 6 shares
h. Secondo Lambatero 4 shares
i. Lambatero 3 shares
j. Chief Swimmer 6 shares
k. Winch Operator 4 shares
l. Other crew 2 shares
3. Out of the remaining 55% of the remaining of the gross monthly earning, the expenses for the repairs of boat,
net, engine, and light boat, oil and fuel, and food and ropes were charged [to the] remaining amount which
expenses usually exceeded 55% of the monthly gross income and left nothing to the officers and crew like the
complainant.
4. The Officers and crew, including the complainant received monthly income on 10% "sideline" aforementioned
and commission P8.00/fish box sold every day which they shared, while the respondent who kept the record of the

income and expenses got 35% of the gross monthly income, and free maintenance and repair of his fishing boat
and equipment. He also control [sic] the selling price of the daily fish catch and [sic] unknown to the officers and
crew.
The respondent was the one who hired the complainant. He made all the job promotions, paid the salaries and
dismissed the complainant. The respondent directed personally the fishing operation, where to send the light boat,
where to fish and when to [go] ashore. In other words he had complete control of his fishing boat, the officers and
crew.
Respondent on the other hand, in [his] Answer and Position Paper, states that he is the owner and operator of
three (3) fishing boats operating in the province of Antique; that complainant used to work as patron of one of the
fishing vessels owned by the respondent; that agreement between the complainant and respondent was for the
former to share with the members of the crew [sic] and the respondent the catch of the fishing vessels with the
respondent providing for fuel and oil, equipments [sic] and other [sic] which the complainant and the crew needs
[sic] for a particular voyage; that the fishing vessels go out fishing at the initiative of the complainant and the crew
members; that the respondent has no participation whatsoever in so far as the decision when to go out is
concerned; that the respondent's only obligation is to provide for fuel and oil and the equipments [sic] needed by
the crew; that the complainant was not paid any salary and his compensation consist [sic] only of his share in the
catch of the fishing vessel everytime it goes out fishing; that the fishing vessel does not go out everyday not the
whole year round; that it is not true that the complainant receives [a] monthly salary of P450.00 per month
because his only compensation is his share in the catch of the fishing vessel; that there is no employer-employee
relationship which exist [sic] between the complainant and the respondent because as alleged patron of the
respondent's fishing boat, the complainant is not under the orders of the respondent as regards his alleged
employment; that the complainant and the crew go out to sea not upon the direction of the boat owner but upon
their own volition as to when and how long and where to go fishing; that the letter perform no services for the boat
owner but for their benefit; that the undertaking therefore is a joint venture with the respondent as boat owner,
supplying the boat and its equipment and the patron (the complainant) and the crew members contributing
necessary labor and the parties getting specific shares for their respective contributions. 11
In determining the existence of an employer-employee relationship, Labor Arbiter Lagoc meticulously discussed
the elements thereof, especially that of private respondent's power of control over petitioner with respect to the
means and methods by which the work was to be accomplished, thus:
Complainant's evidence that control and supervision is exercised by respondent, and certain amounts are given to
him aside from his fish share in the catch is his testimony on cross-examination:
Q. As patron you also decide when to set on [sic] to go out fishing and usually this happen [sic] when the right start
[sic]?
A. Yes, it depends upon the order of the owner, we just obey.
(p. 3, TSN 6 August 1993)
xxx xxx xxx
and in the re-direct examination, viz:
Q. What about when you were patron of the fishing boat of Mr. Lo what you [would] get aside from your share of
fish catch monthly or any other compensations [sic]?
Labor Arbiter:
Your question is already stated in your Position Paper, paragraph 4
Atty. Pefianco:
Yes, Okey [sic] but I want to reiterate it now.
A. P200.00 every month and two pesos per box and there are 15 of us.
Q. That is in your position paper, you stated here P250.00 so which is correct Mr. Witness 250.00 or 500.00 a
month?
Atty. Operiano:
I object that is not proper for re-direct.
A. P450.00
(p. 19, TSN 6 August 1993)
Respondent's evidence on the same issue is his testimony, corroborated by Nismal and Tonding that it is
complainant who decides when to sail out to the [sic] sea, where to fish, how long they will stay fishing [at] sea and
when to go bank [sic] to the port.

Nismal is the fish dealer of Sheenly Joy 1 owned by respondent while Tonding work[s] as [a] crew member of
respondent's boat Sheenly Joy 3.
No material inconsistencies were show in all the witnesses [sic] testimonies during cross-examination. We are
placed in a quandary since both parties may be assumed to be aware of the Supreme Court's ruling in [the]
Pajarillo and Ruga cases and adopted their respective positions to conform with the facts of those two (2) cases.
But be that as it may, although respondent's declaration that he does not have supervision and control over the
work of complainant is corroborated by witnesses Nismal and Tonding, We nevertheless find the testimonies of the
corroborating witnesses as wanting in probative value since there are ties between the witnesses and respondent
which under the natural course of things will cause them (witnesses) to take the side of respondent.
There is more probative value in complainant's testimony that respondent gave orders to set sail and that the
patron and crew [would] merely obey.
Respondent ha[s] been in the fishing business for years. He first had only one boat. He infused hundreds of
thousands, if not millions, as capital in the business and caused the acquisition of two (2) more boats.
This simply means that he is knowledgeable about the deep sea fishing business. Indeed, it is foolhardy for a
businessman to invest this kind of money in a fishing boat and let somebody operate it without him exercising at
least the right to control the manner its [sic] going to be used in the work to be done although not actually
exercising such right.
Complainant's testimony although uncorroborated is more [within] the realm of the actual facts surrounding the
circumstances of this case. Moreover, the positive allegations of complainant prevails over the denials of
respondent.
As to the issue concerning illegal dismissal, unfair labor practice and other money claims, Labor Arbiter Lagoc
held:
On the issue of illegal dismissal we find for the complainant. The charges of illegal dismissal was by invoking no
employer-employee relationship, not refuted by respondent. Thus we find that the severance of [the] employeremployee relationship was caused by respondent. The dismissal not having been justified, perforce the same is
not one for just cause or authorized under the law. Since complainant seeks separation pay as relief, then the
same must be granted.
Complainant served from 1988 to 1990 or two (2) years. He is thus entitled to two (2) months separation pay, this
being a case of illegal dismissal. Since complainant failed to state his monthly income, the separation pay is
therefore computed at the minimum basis daily rate provided for my [sic] law at the time of dismissal multiplied by
the number of working days a month, which according to complainant is 26 working days per month, and the result
multiplied by 2 months. (P89.00/day x 26 working days x 2 months separation pay = P4,628.00)
With respect to complainant's charge of unfair labor practice the so-called unfair labor practice act was not
specified thus the same must perforce fail.
Regarding the issue of money claims, complainant as Patron of the boat is a managerial employee thus he is
excepted from the provision[s] of Book III, of the Labor Code.
Moreover, it is not disputed that complainant as Patron of the boat shares in the income of the sale "fish catch",
and this sharing of income in the fish catch is even true when he was still a crew member of the fishing boat
owned by respondent. Persons who are given shares in the fish caught are not covered by the Labor Standards
Law which [complainant] charged herein [respondent] for violations [sic]. Thus, the herein complainant's money
claims are likewise dismissed for lack of merit.
Both petitioner and private respondent appealed to the NLRC.
In its decision 12 of 17 March 1995, the NLRC dismissed both appeals for lack of merit. The NLRC rejected
petitioner's claim for reinstatement and back wages because "it appears in the complaint filed on September 5,
1991 he only sought for the payment of his separation pay, among others." and under Section 3, Rule V of the

Rules of the Commission, parties are not allowed to allege facts or present evidence to prove facts not referred to
and any cause or causes of action not included in the complaint or position papers, affidavits and other
documents.
Petitioner and private respondents separately moved for reconsideration of the decision,
denied in its resolution 14 of 19 May 1995.

13

which the NLRC

Before this Court, petitioner contends that the NLRC committed grave abuse of discretion in refusing to award his
monetary claims, including back wages and other monetary benefits, in light of his having been dismissed without
just cause.
The Office of the Solicitor General (OSG) filed a Manifestation In Lieu of Comment wherein it recommends that
back wages be awarded to petitioner, pursuant to Article 279 of the Labor Code and the decisions in Torillo v.
Leogardo, 15 Santos v. NLRC 16 and General Baptist Bible College v. NLRC. 17

elsewhere from the date of his dismissal up to his reinstatement.

19

Petitioner would have, likewise, been entitled to reinstatement as a consequence of his illegal dismissal from
employment. However, by expressly asking for separation pay, he is deemed to have opted for separation pay in
lieu of reinstatement. This is the tenor of the holding in Reformist Union v. NLRC 20 to the effect that separation pay
is awarded as an alternative to reinstatement.
Corollary then to the foregoing is the matter of computing both the back wages and the separation pay due
petitioner. To be reckoned for the former is the period of putative service. This pertains to that period from the date
petitioner was dismissed from employment on 2 December 1990 until he could have been reinstated which, taking
into account the appeals separately interposed by petitioner and private respondent from the decision of the labor
arbiter, and the filing of this case, could have been done only after the finality of this decision affirming the finding
of the labor arbiter and the NLRC that petitioner was illegally dismissed from his employment by private
respondent. As regards separation pay, the same must be computed from the time petitioner was first employed
by private respondent until the finality of this decision.

In its Comment which we required to be filed, the NLRC failed to address the issues raised in this petition.
In his comment, private respondent supported the stand of the labor arbiter in that petitioner was a managerial
employee and, therefore, not covered by Book III of the Labor Code; hence, petitioner was not entitled to back
wages and the other monetary claims he sought.
The sole issue before us is whether the NLRC acted with grave abuse discretion amounting to lack or excess of
jurisdiction when it dismissed petitioner's claim for separation pay, back wages, allowances and damages.
The petition is meritorious as to the issue of back wages.
Grave abuse of discretion attended the refusal of the labor arbiter and the NLRC to award back wages to
petitioner, simply because petitioner did not ask for such relief in his complaint. In so doing, the NLRC relied solely
on Section 3 of Rule V of the Rules of Procedure of the NLRC.
This is a patently erroneous conclusion.
First, in his complaint, petitioner charged private respondent with, inter alia, illegal dismissal. He similarly prayed
for back wages in his position paper and claimed back wages once more in his appeal before the NLRC.
We have also observed that the complaint was a pro-forma mimeographed form and petitioner merely put an "X"
mark on the nature or description of the charge enumerated after the paragraph reading:
Complainant hereby charges respondent of:
Among those marked with an "X" were "illegal dismissal" and "separation pay and/or retirement/resignation
benefit." It must be noted that "back wages" was not among guided solely by what appeared in the pro-forma form
when he did not specifically pray for "back wages." Therefore, it was entirely inaccurate for the NLRC to have held
that petitioner only sought separation pay.
Second, and more importantly, both the labor arbiter and the NLRC concluded that petitioner was illegally
dismissed. Conformably then with Article 279 of the Labor Code, he is entitled to an award of back wages since
the Article expressly mandates that an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances,
and to other benefits or their monetary equivalent computed from the time compensation was withheld up to the
time of actual reinstatement. The provision gives meaning to the laborer's constitutional guaranty of security of
tenure and finds solid basis on the universal principles of justice and equity. The grant of back wages allows the
unjustly and illegally dismissed employee to recover from the employer that which the former lost by way of wages
as a result of his dismissal from employment.
It is evident that the award of back wages resulting from the illegal dismissal of an employee is a substantive right.
Thus, the failure to claim back wages in a complaint for illegal dismissal has been held to be a mere procedural
lapse which cannot defeat a right granted under substantive law. 18
The present state of jurisprudence allows full recovery of back wages pursuant to the express provisions of Article
279 of the Labor Code, i.e., without any deduction of income the employee may have derived from employment

As to petitioner's other monetary claims, significant to the resolution of said issue is Article 82 of the Labor Code,
which provides:
Art. 82. Coverage. The provisions of this Title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for supports, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.
As used herein, managerial employees" refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff.
xxx xxx xxx
A managerial employee is therefore excluded from the coverage of the law as regards conditions of employment
which include hours of work, weekly rest periods, holidays, service incentive leaves and service charges. 21
The labor arbiter classified petitioner as a managerial employee. We have not been provided with any compelling
reason to overturn this factual finding. As chief patron of the M/DCA "Sheenly Joy 1," albeit an unlicensed one, 22
petitioner was tasked to take complete charge and command of the vessel and perform the responsibilities and
duties of a ship captain. 23 Petitioner, an employee who falls squarely within the category of "officers or members
of a managerial staff," is thus exempted from payment of overtime pay, premium pay for holidays and rest days
and service incentive leave pay. 24 Therefore, the labor arbiter was correct in holding that petitioner was not
entitled to overtime pay, legal holiday pay, premium pay for holidays and rest days.
WHEREFORE, the instant petition is hereby GRANTED in part. The Decision of the National Labor Relations
Commission of 17 March 1995 and the Decision of the Labor Arbiter of 15 February 1994 in NLRC Case No. V0254-92 (RAB-06-09-50298-91) are hereby MODIFIED. As modified, private respondent EMMANUEL LO is
hereby ORDERED, to pay back wages to petitioner ROLANDO DE LA CRUZ, for the period from the date the
latter was illegally dismissed from service until finality of this decision, with interest at 6% per annum until this
decision becomes final and executory, after which time, the interest rate shall be 12% per annum until the amounts
due are actually paid or satisfied; and separation pay at the rate of one (1) month's pay for every year of service
computed from the date he was first employed until the finality of this decision, until actually paid.
No pronouncement as to costs.
SO ORDERED.

CIR en banc on the ground that petitioner failed to furnish the union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no jurisdiction over claims for
overtime compensation and, secondary that the CIR did not make "a correct appraisal of the facts, in the light of
the evidence" in holding that mealtime periods should be included in overtime work because workers could not
leave their places of work and rest completely during those hours.
In support of its contention that the CIR lost its jurisdiction over claims for overtime pay upon the enactment of the
Industrial Peace Act (Republic Act No. 875), petitioner cites a number of decisions of this Court. On May 23, 1960,
however, We ruled in Price Stabilization Corp. v. Court of Industrial Relations, et al., G.R. No. L-13206, that
Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in express terms,
is that where the employer-employee relationship is still existing or is sought to be reestablished because of its
wrongful severance, (as where the employee seeks reinstatement) the Court of Industrial Relations has
jurisdiction over all claims arising out of, or in connection with the employment, such as those related to the
Minimum Wage Law and the Eight-Hour Labor Law. After the termination of their relationship and no reinstatement
is sought, such claims become mere money claims, and come within the jurisdiction of the regular courts,
We are aware that in 2 cases, some statements implying a different view have been made, but we now hold and
declare the principle set forth in the next preceding paragraph as the one governing all cases of this nature.
This has been the constant doctrine of this Court since May 23, 1960.1

G.R. No. L-15422

November 30, 1962
NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS UNION, respondents.
Government Corporate Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for petitioner.Eulogio R. Lerum
for respondent National Textile Workers Union.Mariano B. Tuason for respondent Court of Industrial Relations.
REGALA, J.:
This is a case for review from the Court of Industrial Relations. The pertinent facts are the following:
At the National Development Co., a government-owned and controlled corporation, there were four shifts of work.
One shift was from 8 a.m. to 4 p.m., while the three other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10
p.m. and, finally, from 10 p.m. to 6 a.m. In each shift, there was a one-hour mealtime period, to wit: From (1) 11
a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8 p.m. for those working
between 2 p.m. and 10 p.m.
The records disclose that although there was a one-hour mealtime, petitioner nevertheless credited the workers
with eight hours of work for each shift and paid them for the same number of hours. However, since 1953,
whenever workers in one shift were required to continue working until the next shift, petitioner instead of crediting
them with eight hours of overtime work, has been paying them for six hours only, petitioner that the two hours
corresponding to the mealtime periods should not be included in computing compensation. On the other hand,
respondent National Textile Workers Union whose members are employed at the NDC, maintained the opposite
view and asked the Court of Industrial Relations to order the payment of additional overtime pay corresponding to
the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19, 1959, holding that mealtime
should be counted in the determination of overtime work and accordingly ordered petitioner to pay P101,407.96 by
way of overtime compensation. Petitioner filed a motion for reconsideration but the same was dismissed by the

A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v. Manila Railroad Co., et al., G.R.
No. L-17905, May 25, 1962, in which We held that, for such jurisdiction to come into play, the following requisites
must be complied with: (a) there must exist between the parties an employer-employee relationship or the
claimant must seek his reinstatement; and (b) the controversy must relate to a case certified by the President to
the CIR as one involving national interest, or must arise either under the Eight-Hour Labor Law, or under the
Minimum Wage Law. In default of any of these circumstances, the claim becomes a mere money claim that comes
under the jurisdiction of the regular courts. Here, petitioner does not deny the existence of an employer-employee
relationship between it and the members of the union. Neither is there any question that the claim is based on the
Eight-Hour Labor Law (Com. Act No. 444, as amended). We therefore rule in favor of the jurisdiction of the CIR
over the present claim.
The other issue raised in the appeal is whether or not, on the basis of the evidence, the mealtime breaks should
be considered working time under the following provision of the law;
The legal working day for any person employed by another shall be of not more than eight hours daily. When the
work is not continuous, the time during which the laborer is not working and can leave his working place and can
rest completely shall not be counted. (Sec. 1, Com. Act No. 444, as amended. Emphasis ours.)
It will be noted that, under the law, the idle time that an employee may spend for resting and during which he may
leave the spot or place of work though not the premises 2 of his employer, is not counted as working time only
where the work is broken or is not continuous.
The determination as to whether work is continuous or not is mainly one of fact which We shall not review as long
as the same is supported by evidence. (Sec. 15, Com. Act No. 103, as amended, Philippine Newspaper Guild v.
Evening News, Inc., 86 Phil. 303).
That is why We brushed aside petitioner's contention in one case that workers who worked under a 6 a.m. to 6
p.m. schedule had enough "free time" and therefore should not be credited with four hours of overtime and held
that the finding of the CIR "that claimants herein rendered services to the Company from 6:00 a.m. to 6:00 p.m.
including Sundays and holidays, . . . implies either that they were not allowed to leave the spot of their working
place, or that they could not rest completely" (Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et
al., G.R. No. L-9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is to what constitutes compensable work, rather the
question is one of fact depending upon particular circumstances, to be determined by the controverted in cases.

(31 Am. Jurisdiction Sec. 626 pp. 878.)

In this case, the CIR's finding that work in the petitioner company was continuous and did not permit employees
and laborers to rest completely is not without basis in evidence and following our earlier rulings, shall not disturb
the same. Thus, the CIR found:
While it may be correct to say that it is well-high impossible for an employee to work while he is eating, yet under
Section 1 of Com. Act No. 444 such a time for eating can be segregated or deducted from his work, if the same is
continuous and the employee can leave his working place rest completely. The time cards show that the work was
continuous and without interruption. There is also the evidence adduced by the petitioner that the pertinent
employees can freely leave their working place nor rest completely. There is furthermore the aspect that during the
period covered the computation the work was on a 24-hour basis and previously stated divided into shifts.
From these facts, the CIR correctly concluded that work in petitioner company was continuous and therefore the
mealtime breaks should be counted as working time for purposes of overtime compensation.
Petitioner gives an eight-hour credit to its employees who work a single shift say from 6 a.m. to 2 p.m. Why cannot
it credit them sixteen hours should they work in two shifts?
There is another reason why this appeal should dismissed and that is that there is no decision by the CIR en banc
from which petitioner can appeal to this Court. As already indicated above, the records show that petitioner's
motion for reconsideration of the order of March 19, 1959 was dismissed by the CIR en banc because of
petitioner's failure to serve a copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No. 103, states:
The movant shall file the motion (for reconsideration), in six copies within five (5) days from the date on which he
receives notice of the order or decision, object of the motion for reconsideration, the same to be verified under
oath with respect to the correctness of the allegations of fact, and serving a copy thereof personally or by
registered mail, on the adverse party. The latter may file an answer, in six (6) copies, duly verified under oath.
(Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We sustained the dismissal of a
motion for reconsideration filed outside of the period provided in the rules of the CIR. A motion for reconsideration,
a copy of which has not been served on the adverse party as required by the rules, stands on the same footing.
For "in the very nature of things, a motion for reconsideration against a ruling or decision by one Judge is in effect
an appeal to the Court of Industrial Relations, en banc," the purpose being "to substitute the decision or order of a
collegiate court for the ruling or decision of any judge." The provision in Commonwealth Act No. 103 authorizing
the presentation of a motion for reconsideration of a decision or order of the judge to the CIR, en banc and not
direct appeal therefore to this Court, is also in accord with the principal of exhaustion of administrative remedies
before resort can be made to this Court. (Broce, et al., v. The Court of Industrial Relations, et al., G.R. No. L12367, October 29, 1959).
Petitioner's motion for reconsideration having been dismissed for its failure to serve a copy of the same on the
union, there is no decision of the CIR en banc that petitioner can bring to this Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are hereby affirmed and the
appeal is dismissed, without pronouncement as to costs.

its judicial functions by ordering the Chief of the Examining Division or his representative to compute the overtime
pay; (4) the finding that there was no agreement to withdraw Case No. 1055-V in consideration of the wage
increases in the Collective Bargaining Contract (Exh. "A") is not supported by substantial evidence; and (5) the
court below had no authority to order the company to adopt a straight 8-hour shift inclusive of meal period.
On the issue of jurisdiction over claims for overtime pay, we have since definitely ruled in a recent decisions that
the Industrial Court may properly take cognizance of such cases if, at the time of the petition, the complainants
were still in the service of the employer, or, having been separated from such service, should ask for
reinstatement; otherwise, such claims should be brought before the regular courts (NASSCO v. CIR, et al., L13888, April 29, 1960; FRISCO v. CIR, et al., L-13806, May 23, 1960; Board of Liquidators, et al. vs. CIR, et al., L15485, May 23, 1960; Sta. Cecilia, Sawmills Co. vs. CIR, L-14254 & L-14255, May 27, 1960; Ajax International
Corp. v. Seguritan, L-16038, October 25, 1960; Sampaguita Pictures, Inc., et al. vs. CIR, L-16404, October 25,
1960). Since, in the instant case there is no question that the employees claiming overtime compensation were
still in the service of the company when the case was filed, the jurisdiction of the Court of Industrial Relations
cannot be assailed. In fact, since it is not pretended that, thereafter, the complainants were discharged or
otherwise terminated their relationship with the company for any reason, all of said complainants could still be with
the company up to the present.
Petitioner herein claims that the one-hour meal period should not be considered as overtime work (after deducting
15 minutes), because the evidence showed that complainants could rest completely, and were not in any manner
under the control of the company during that period. The court below found, on the contrary, that during the so
called meal period, the mechanics were required to stand by for emergency work; that if they happened not to be
available when called, they were reprimanded by the leadman; that as in fact it happened on many occasions, the
mechanics had been called from their meals or told to hurry Employees Association up eating to perform work
during this period. Far from being unsupported by substantial evidence, the record clearly confirms the above
factual findings of the Industrial Court.

G.R. No. L-16275

February 23, 1961
PAN AMERICAN WORLD AIRWAYS SYSTEM (PHILIPPINES), petitioner,
vs.
PAN AMERICAN EMPLOYEES ASSOCIATION, respondent.
Ross, Selph and Carrascoso for petitioner.Jose Espinas for respondent.
REYES, J.B.L., J.:
Appeal by certiorari from the decision of the Court of Industrial Relations in Case No. 1055-V dated October 10,
1959, and its resolution en banc denying the motion for reconsideration filed by the petitioner herein.
The dispositive portion of the appealed decision reads: .
WHEREFORE, the Court orders the Chief of the Examining Division or his representative to compute the overtime
compensation due the aforesaid fourteen (14) aircraft mechanic and the two employees from the Communication
Department based on the time sheet of said employees from February 23 1952 up to and including July 15, 1958
and to submit his report within 30 days for further disposition by the Court; and the company shall show to the
Court Examiner such time sheets an other documents that may be necessary in the aforesaid computation; and
two (2) representatives for the company and two (2) representatives for the union shall be chosen to help the
Court Examiner in said computation.

Similarly, this Court is satisfied with the finding that there was no agreement to withdraw Case No. 1055-V in
consideration of the wage increases obtained by the, union and set forth in the Collective Bargaining Agreement
Exhibit "A". As reasoned out by the court below, such alleged agreement would have been incorporated in the
contract if it existed. The fact that the union filed a motion to dismiss without prejudice, after the Collective
Bargaining Contract had been signed, did not necessarily mean that it had agreed to withdraw the case in
consideration of the wage increases. The motion itself (Annex "B", Petition for Certiorari) was expressly based on
an understanding that the company would "formulate a schedule of work which shall be in consonance with C. A.
444". All in all, there is substantial evidence in the record to support the finding of the court below that no such
agreement was made.
It is next contended that in ordering the Chief of the Examining Division or his representative to compute the
compensation due, the Industrial Court unduly delegated its judicial functions and thereby rendered an incomplete
decision. We do not believe so. Computation of the overtime pay involves a mechanical function, at most. And the
report would still have to be submitted to the Industrial Court for its approval, by the very terms of the order itself.
That there was no specification of the amount of overtime pay in the decision did not make it incomplete, since this
matter would necessarily be made clear enough in the implementation of the decision (see Malate Taxicab &
Garage, Inc. vs. CIR, et al., L-8718, May 11, 1956).

The company is also ordered to permanently adopt the straight 8-hour shift inclusive of meal period which is
mutually beneficial to the parties.

The Industrial Court's order for permanent adoption of a straight 8-hour shift including the meal period was but a
consequence of its finding that the meal hour was not one of complete rest, but was actually a work hour, since for
its duration, the laborers had to be on ready call. Of course, if the Company practices in this regard should be
modified to afford the mechanics a real rest during that hour (f. ex., by installing an entirely different emergency
crew, or any similar arrangement), then the modification of this part of the decision may be sought from the Court
below. As things now stand, we see no warrant for altering the decision.

SO ORDERED.

The judgment appealed from is affirmed. Costs against appellant.

In this appeal, petitioner advances five proposition which, briefly, are as follows: (1) the Industrial Court has no
jurisdiction to order the payment of overtime compensation, it being a mere monetary claim cognizable by regular
courts; (2) the finding that the one-hour meal period should be considered overtime work (deducting 15 minutes as
time allotted for eating) is not supported by substantial evidence; (3) the court below had no authority to delegate

On January 8, 1958, petitioner corporation filed a motion for reconsideration of said order, which motion was
resolved by respondent court, en banc, as follows: 2 judges voting for straight denial; 2 judges voting for the
setting aside of the order as null and void on the ground of lack of jurisdiction; and 1 judge concurring in the denial
of the motion for reconsideration, on the ground that the question of lack of jurisdiction has not been raised in the
pleading. As a result; petitioner corporation has filed this present petition.
There are two questions of law to be determined in this case, to wit: (1) whether respondent court had jurisdiction
over the present claim for overtime pay filed by respondent Union; and (2) whether the same court correctly
applied Articles 1393 and 1396 to the new Civil Code to the case.
As to the first question, there still seems to be some lack of clear and definite understanding of the jurisdiction of
the Court of Industrial Relations, with regards to money claims of laborers or employees against their employers.
The fact that in the present case the judges themselves of the Court of Industrial Relations are divided on this
matter, attests to the existence of such misapprehension. It is well therefore to review some of the leading decided
cases touching on this point, for the purpose of clarifying this fundamental question.
In the PAFLU vs. Tan Case,1 we held that the Court of Industrial Relations has jurisdiction over cases (1) when the
labor dispute affects an industry which is indispensable in the national interest and is so certified by the President
to the industrial court (Sec. 10, Rep. Act No. 875); (2) when the controversy refers to the minimum wage under the
Minimum Wage Law (Rep. Act No. 602); (3) when it involves hours of employment under the Eight-Hour Labor
Law (Com. Act No. 444); and (4) when it involves an unfair labor practice (Sec. 5-a, Rep. Act No. 875).

G.R. No. L-13806

May 23, 1960
PRICE STABILIZATION CORPORATION, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and PRISCO WORKER'S UNION, ET AL., respondents.
Govt. Corp. Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for petitioner.Ezer R. Yutuc for the
respondent CIR.Vicente T. Ocampo for respondent Union.
BARRERA, J.:
This is a petition for review by certiorari taken by the Price Stabilization Corporation (PRISCO) from the decision of
the Court of Industrial Relations (in Case No. 840-V [6]) of December 27, 1957.
It appears that under date of February 15, 1955, respondent PRISCO Worker's Union, a labor organization duly
registered with the Department of Labor, filed with respondent court, a petition praying that herein petitioneremployer PRISCO be ordered to pay its present employees, claimants-members of the said Union, their basic pay
and at least 25 per cent additional compensation for one hour overtime work they had previously rendered as
security guards of petitioner, from April 17, 1953 to January 13, 1954, and the additional compensation of at least
25 per cent for the work they have been rendering on Sundays and legal holidays, from March 7, 1954 and on.
On March 15, 1955, the petitioner filed an answer denying respondent Union's claim for payment of one hour
overtime work, asserting that such overtime, if rendered, not having been authorized; although some of the said
claimants had rendered work in Sundays and legal holidays, the same had already been paid from March 6, 1954;
and finally alleging that the same claim for work on Sundays and legal holidays had already been withdrawn.
The case was thereafter heard and, after hearing, respondent court, on December 27, 1957, issued an order
requiring petitioner to pay the said claimants, members of respondent Union, their basic pay and 25 per cent
additional compensation for the one hour overtime work they had rendered from April 16, 1953 to January 13,
1954. However, for lack of evidence and in view of a petition signed by 59 of the 131 claimants withdrawing their
claim for pay for work performed on Sundays and legal holidays, the court dismissed the second claim.

Later, in the case of Detective and Protective Bureau Incorporated vs. Felipe Guevarra, et al.,2 involving claims for
refunds of deductions from respondents' salaries, payment of additional compensation for work performed on
Sundays and holidays, and for night work, and grant of vacation and sick leave pay, this Court held that the Court
of Industrial Relations had jurisdiction, inasmuch as the claimants were all employees of the Detective and
Protective Bureau, Inc., at the time of filing of their claims in Case No. 764-V in the Court of Industrial Relations. To
the same effect is the case of Isaac Peral Bowling Alley vs. United Employees Welfare Association, et al., (102
Phil., 219).
Subsequently, in the case of Santiago Aguilar vs. Jose Salumbides (G.R. No. L-10124, prom, December 28,
1957), this Court declared that the Court of Industrial Relations had no longer jurisdiction to hear and determine
claims of ex-employees against their former employer for overtime, wage differential, and separation pays.
Again, in the case of Roman Catholic Archbishop of Manila vs. Yanson, et al.,(G.R. No. L-12341) and Elizalde and
Co. Inc., vs. Yanson et al., (G.R. No. L-12345) jointly decide on April 30, 1958, this Court, in a unanimous opinion,
declared:
In the present case, it is apparent that the petition below is simply for the collection of unpaid salaries and wages
alleged to be due for the services rendered years ago. No labor dispute appears to be presently involved since the
petition itself indicates that the employment has long terminated and petitioners are not asking that they be
reinstated. Clearly, the petition does not fall under any of the cases enumerated in the law as coming within the
jurisdiction of the Industrial Court, so that it was error for that court not to have ordered its dismissal.
Indeed, even under Commonwealth Act No. 103, as amended by Com. Act No. 559, the court below could not
have taken cognizance of the present case. For in order for that court to acquire jurisdiction under that law, the
requisites mentioned in section 4 thereof must all be present, one of them being that there must be an industrial or
agricultural dispute which is causing of likely to cause a strike or lockout. With the employment already terminated
years ago, this last mentioned requisite cannot be supposed to still exist.
Then came the decision in the NASSCO vs. Almin, et al., case (104 Phil., 835;56 Off. Gaz. [9] 1879) in which this
Court upheld again the jurisdiction of the Court of Industrial Relations to hear and determine the claim of
respondents at the time presently and actually in the employ of the petitioner for overtime compensation for
work they were then rendering since 1950 on Sundays and holidays and even at night.
On the same theory, this Tribunal and the Chua Workers' Union (NLU) vs. City Automotive Company, et al., case3
were the claimants for differential and overtime pays were former employees of the respondent company, ruled
that the Court of Industrial Relations had no jurisdiction.

The latest case is that of Monares vs. CNS Enterprises, et al., (G.R. No. L-11749, prom. May 29, 1959) in which
this Court, speaking through the Chief Justice, held that the Court of Industrial Relations and not the Court of First
Instance, has jurisdiction where the claimant, although no longer in the service of the employer, seeks in his
petition the payment of differential and overtime pay and his reinstatement.
Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in express terms,
is that where the employer-employee relationship is still existing or is sought to be reestablished because of its
wrongful severance (as where the employee seeks reinstatement), the Court of Industrial Relations has
jurisdiction over all claims arising out of, or in connection with employment, such as those related to the Minimum
Wage Law and the Eight-Hour Labor Law. After the termination of the relationship and no reinstatement is sought,
such claims becomes mere money claims, and come within the jurisdiction of the regular courts.
We are aware that in 2 cases, 4 some statements implying a different view have been made, but we now hold and
declare the principle set forth in the preceding paragraph as the one governing all cases of this nature.
It appearing that in the present case, the respondents-claimants are, or at least were, at the time of presenting
their claims, actually in the employ of herein petitioner, the Court of Industrial Relations correctly took cognizance
of the case.
In respect of the second issue, it appears that claimants-security guards have been employed and required to
observe a 24-hour guard duty divided into 3 shifts of 8 hours each. On April 15, 1953, the Assistant Chief Security
Officer of petitioner corporation, acting for the Chief Security Officer, issued a Memorandum (Annex A), directing
the Security guards to report for duty 2 hours in advance of the usual time for guard work. Pursuant thereto,
claimants had been rendering such overtime work until January 13, 1954 when the order was revoked after a
change of management.
Petitioner, however, contends that said memorandum of the Assistant Chief Security Officer was issued without
authority and, therefore, it is not bound to pay for the alleged overtime. But, as found by respondent court, shortly
after the enforcement of the aforementioned memorandum, the security guards protested to the management of
petitioner corporation, more particularly to Mr. Santiago de la Cruz, General Manager, Atty. Graciano Borja,
Director, and Mr. Espiritu, Director. Instead of revoking said memorandum on the ground that it was unauthorized
by the management, General Manager De la Cruz told the security guards that the reason why it was being
enforced, was to discipline them and that their work was only light and that 1 hour was of no importance. This, the
lower court held, amounted to a tacit ratification of the memorandum, on the part of the said official who, as
claimed by petitioner itself, had the power to validly act for it. (See also Sec. 6, Exec. Order No. 350, series of
1950.) Hence, the lower court concluded, applying the provisions of Articles 1393 and 1396 5 of the new Civil Code,
that any defect, if any which said memorandum of the Assistant Chief Security Officer may have at the time it was
constituted, was, therefore, corrected.
But petitioner urges that Articles 1393 and 1396 refer to voidable contracts and the questioned memorandum is
not such a contract but an order issued by one not authorized and, therefore, is illegal and cannot be ratified
tacitly.
This view is without merit. There is no question that a contract of employment exists between petitioner and
claimants-respondents, and that pursuant to the terms thereof, the latter are to render 8 hours labor. When
petitioner's official required respondents to render an additional hour work, and the respondents had to comply (as
non-compliance was punishable and actually punished with disciplinary action), a supplemental contractual
obligation was created both under the terms of the original contract of employment and of the Eight-hour Labor
Law, that such additional work was to be compensated. That the memorandum giving rise to this situation was
originally authorized, did not make it illegal to the extent of not being capable of ratification by the duly authorized
official, the General Manager of petitioner corporation. Hence, the lower court correctly applied Articles 1393 and
1396, upon the facts found by it in this case and amply supported by the record. Wherefore, finding no error in the
decision appealed from and the resolution upholding it, the same are hereby affirmed, with costs against the
petitioner. So ordered.

relented.
In November 1980, Fr. Gonzales was replaced by Fr. Pablo Garcia, an American, as new director. Fr. Garcia
required petitioner to report for work during the summer before the beginning of school year 1981-1982. Petitioner
informed him that her contract does not require her to report for work during the summer vacation. Fr. Garcia
promised to verify her allegation. However, he failed to inform petitioner of his findings. Thus, in order that her
failure to report for work may not be misinterpreted, petitioner filed leaves of absence extending from April 1, 1981
to June 14, 1981 (Rec. pp. 223-225). Petitioner failed to receive her vacation pay.
During school year 1981-1982, petitioner was assigned to teach health subjects to 900 students spread out in
nineteen (19) sections of the entire high school department. This situation came about because the two (2)
teachers of the health subjects had left the school. Petitioner, however, was not given compensation for teaching,
notwithstanding the fact that other teachers were duly compensated for extra work done. During that school year
petitioner tried to arrange for a meeting with Fr. Garcia regarding her vacation pay, but to no avail because Fr.
Garcia was always busy. In October 1981, Fr. Garcia suffered a heart attack which necessitated his
hospitalization. In December 1981, petitioner received her 13th month pay which was computed on the basis of a
10-month period only.
On April 5, 1982, Fr. Garcia again required petitioner to work during that summer to update all the clinical records
of the students (Rec. p. 242). In a letter dated April 7, 1982, petitioner objected to the order by reiterating that her
contract does not require her to report for work during summer. In addition, she reminded Fr. Garcia that she had
not received any compensation for teaching health subjects the past school year (Rec. p. 6). On the same day, Fr.
Garcia replied in a letter to the effect that it was imperative for her to report for work during the summer because it
is the best time to update the clinical records when no students could disturb her. Also, petitioner was not entitled
to extra compensation for teaching because teaching was allegedly part of her regular working program as a
school nurse (Rec. p. 221).

G.R. No. 75093 February 23, 1990

DELIA R. SIBAL, petitioner,
vs.
NOTRE DAME OF GREATER MANILA, NATIONAL LABOR RELATIONS COMMISSION, respondents.
Semproniano S. Ochoco for petitioner.
Williard B. Riano for private respondent.
PARAS, J.:
In this petition for certiorari, petitioner Delia R. Sibal prays for the reversal of the decision dated April 11, 1986 of
public respondent National Labor Relations Commission which affirmed the decision of the Labor Arbiter dated
October 8, 1982 awarding to petitioner separation pay but denied her claim (1) for compensation for teaching
Health subject to 19 sections; (2) for moral damages; and (3) negating the existence of unfair labor practice. The
within petition further seeks the reinstatement of petitioner to her former position as school nurse in respondent
school without loss of seniority rights with fun backwages from the date of her illegal dismissal up to the time of
actual reinstatement; and finally, seeks the desistance of private respondent Notre Dame of Greater Manila from
further committing unfair labor practice.
The prefatory facts and proceedings as aptly summed up by the Solicitor General and which stand undisputed are:
Petitioner Delia R. Sibal was employed as school nurse by private respondent Notre Dame of Greater Manila
starting January 1973. Prior to school year 1976-1977, she was compensated on a 12-month basis, although she
worked only during the ten-month period of classes. She was not required to report for work for the entire
Christmas and summer vacations. However, on March 10, 1976, respondent's director, Fr. Enrique Gonzales,
requested her to shorten her summer vacation, from two weeks after the last day of classes to two weeks before
the first day of classes of the next school year. Petitioner acceded to the request (Rec. p. 246).
Sometime in April 1980, Fr. Gonzales required petitioner to report during that summer to help in the library. In a
letter dated April 11, 1980, petitioner contested the order, stating that it will necessitate a change in the terms and
conditions of her employment and that library work is alien to her profession as nurse (Rec. p. 45). Fr. Gonzales

On April 14, 1982, petitioner, apart from reiterating her objection to the order, called the attention of Fr. Garcia to
the school's failure to pay her salary for the summer of 1981 and of the deficiency in her 13th month pay for that
year (Rec. p. 8). The following day, Fr. Garcia adamantly refused to consider petitioner's demands and threatened
to take drastic measures against her if she remains obstinate in her refusal to follow his order to report for work
that summer (Rec. p. 243). This letter was followed the next day by a memorandum to the same effect (Rec. p.
244). In a letter dated April 19, 1982, petitioner, for the fourth time, informed Fr. Garcia that her contract does not
require her to report for work during summer, and she does not intend to do so that summer of 1982 (Rec. p. 241).
Failing to receive the compensation demanded, May 10, 1982, petitioner filed a complaint for non-payment of the
following; (1) vacation pay for four (4) summer months; (2) compensation for teaching health subjects; and (3)
deficiency in the 13th month pay for 1981 (Annexes A, B, petition). Summons was served on respondent school
on the opening day of classes on June 14, 1982 (Rec. p. 19). That very day when petitioner reported for work,
respondent school served petitioner her letter of termination effective immediately and it also submitted a copy of
the termination paper to the Ministry of Labor and Employment (MOLE) (Rec. pp. 218- 219). The following day,
petitioner filed an amended complaint, adding two more charges: illegal dismissal and unfair labor practice (Annex
C, D, petition). For the next four to five weeks, more than 20 teachers and personnel, backed up by the Faculty
Association of respondent school, pressed for the ouster of Fr. Garcia with the Ministry of Education, Culture, and
Sports (MECS) by virtue of PD 176 and the following charges: oppressive behavior, arrogance, contempt for
Filipinos in general and Filipino teachers in particular; unfairness in dealing with personnel; dictatorial conduct; and
use of abusive language (See Annexes A to F of Annex F, petition). Fr. Garcia was eventually replaced on
September 8, 1983.
In the meantime, respondent school filed its position paper on June 29, 1982, while petitioner filed hers on July 1,
1982 (Rec. pp. 22, 210). In the hearing of July 13, 1982, petitioner directed clarificatory questions to Miss Cristina
Sison, corporate secretary of respondent school (Rec. pp. 57-141). On July 27, 1982, respondent filed its
memorandum, while petitioner filed hers on August 2, 1982 (Rec. pp. 142, 162).
On October 8, 1982, the Labor Arbiter rendered a decision. Petitioner filed a memorandum of partial appeal on
November 11, 1982 (Annex F, petition). Respondent filed opposition to the appeal on January 5, 1983. On January
18, 1983, petitioner filed reply to the opposition. In an urgent ex parte manifestation dated September 20, 1983,
petitioner informed the NLRC that Fr. Pablo Garcia had been replaced by Fr. Jose Arong, a Filipino, as new

director effective September 8, 1983 (Annex G, petition). On April 11, 1986, public respondent NLRC rendered the
questioned decision which affirmed the decision of the Labor Arbiter. (Rollo, pp. 131-136).

actionable wrong. The right is considered to be property within the protection of a constitutional guaranty of due
process of law.

Petitioner thus resorted to this petition which she filed on July 15, 1986.

Significantly, about a month after petitioner's termination on June 14, 1982, more than twenty teachers and
personnel of respondent school, backed by the Faculty Association, petitioned for the ouster of Director Fr. Garcia
for serious charges under P.D. 176. Consequently, Fr. Garcia was replaced on September 8, 1983. Clearly,
therefore, when the assailed NLRC decision was rendered on April 11, 1986, the alleged "strained relations" or
"irritant factors" which the Labor Arbiter capitalized on had been totally eliminated. Respondent NLRC obviously
failed to consider this and thus perpetuated the error committed by the Labor Arbiter in her prior decision. The
eventual replacement of Fr. Garcia all the more confirmed the discriminatory and oppressive treatment which he
gave petitioner.

Petitioner and both the Solicitor General and public respondent NLRC have narrowed down the issues for
resolution to the following:
1. Whether or not the award of separation pay instead of reinstatement is the proper remedy under the
circumstances;
2. Whether or not petitioner is entitled to compensation for teaching health subjects; and
3. Whether or not unfair labor practice existed which would entitle petitioner to moral damages.
For the affirmative resolution of the aforestated issues, petitioner alleges the following:
1. Respondent NLRC failed to give full respect to the constitutional mandate on security of tenure when the
majority decision affirmed the decision of the Labor Arbiter separating and, in effect, dismissing petitioner on the
basis of her perception that petitioner and the director could no longer work harmoniously. The award of
separation pay would defeat and render nugatory the Constitutional guaranty of security of tenure.
2. Petitioner is entitled to compensation relative to her teaching job which is distinct and separate from her duties
as school nurse.
3. Petitioner was, from the very start, subjected to harassment and fabricated charges. She had suffered and
continues to suffer from the time of her dismissal on June 14, 1982 up to the present. She must be entitled to an
award of moral damages.
Public respondent NLRC, however, submits the following:
1. The relationship between petitioner and respondent school had come to the point that reinstatement of
petitioner would cause undue burden on both parties. It would affect petitioner's performance of her duties as
school nurse and private respondent's business.
2. Teaching health subjects is allied to petitioner's job as school nurse, particularly so when the same is done
within the official eight (8) working hour schedule.
3. Petitioner failed to prove her membership in a union. There was no union among the employees of the school in
which case the instances where unfair labor practice may be committed, with the exception of one instance, and
predicated on the existence of a union, would not apply. Private respondent has not been found guilty of unfair
labor practice and it, therefore, follows that she is not entitled to moral damages.
This Court finds merit in the petition.
The Labor Arbiter herself had found that the termination of petitioner was not supported by any just cause or
reason. Yet, she erroneously ordered separation pay instead of reinstatement with backwages based on the
alleged reason that petitioner's working relations with the former director, Father Garcia, had become so strained
and deteriorated that it became impossible for them to work harmoniously again. And the NLRC affirmed such
finding which is untrue and merely speculative.
It should be noted that the alleged conflict between the petitioner and the director was strictly official in nature, the
cause of which was the violation of the terms of employment by the latter. Petitioner's assertion of her right to
unpaid salaries and bonus differential was not motivated by any personal consideration. Rather, she simply
claimed benefits which, under the law, she was entitled to and legally due her. In her act of asserting these money
claims, petitioner observed utmost tact, courtesy and civility so as not to unduly offend the sensibilities of the
director by waiting for his frill recovery from his illness before sending her formal letter of demand; and only after
the school refused to satisfy her money claims did she file the formal complaint with the proper NLRC branch.
Ironically, however, the director gave her a downright shabby treatment by terminating her services without prior
notice and without first filing a case against her wherein she could have defended herself . The school did not
even give credit to her more than nine (9) years of continuous service. Petitioner's termination was a blatant
disregard of due process and Constitutional guarantee of protection to labor.
Thus, in the case of Callanta v. Carnation Philippines, Inc. (145 SCRA 268), this Court held that one's
employment, profession, trade or calling is a "property right", and the wrongful interference therewith is an

The dissenting NLRC Commissioner aptly observed thus:

Moreover, it should be emphasized, that no strained relations should arise from a valid and legal act of asserting
ones right, such as in the instant case, for otherwise, an employee who shall assert his/ her right could be easily
separated from the service by merely paying his/her separation pay on the pretext that his/her relationship with
his/her employer had already become strained.
To Our mind, strained relations in order that it may justify the award of separation pay in lieu of reinstatement with
backwages, should be such, that they are so compelling and so serious in character, that the continued
employment of an employee is so obnoxious to the person or business of the employer, and that the continuation
of such employment has become inconsistent with peace and tranquility which is an Ideal atmosphere in every
workplace. (pp. 98-99, Rollo)
The respondent NLRC erred is sustaining the Labor Arbiter's ruling that petitioner is not entitled to compensation
for teaching health subjects allegedly because petitioner taught during her regular working hours; the subject
Health is allied to her profession as nurse; and she and respondent school had no clear understanding regarding
extra compensation.
The Solicitor General who normally and expectedly speaks for the NLRC has ably refuted the position taken by
the latter. The Court thus finds valid and decisive the following submission of the Solicitor General:
It is submitted, however, that petitioner is entitled to compensation for teaching health subjects. Although the
subject taught is Health and allied to her profession, and is taught during regular working hours, petitioner's
teaching the subject in the classroom and her administering to the health needs of students in the clinic involve
two different and distinct jobs. They cannot be equated with each other for they refer to different functions.
Teaching requires preparation of lesson plans, examinations and grades, while clinical work entails preparation of
clinical records and treating illnesses of students in school. There can be no doubt that teaching health subjects is
extra work for petitioner, and therefore necessitates extra compensation. After all it has been the practice of the
school to pay extra compensation to teachers who were given extra load even during regular working hours
(Annex G of Annex F, Petition). The fact that respondent school failed to produce the records of those teachers
prove that they were paid for extra work. Hence, petitioner should likewise be paid compensation. (pp. 138-139,
Rollo)
It must be noted that petitioner has established that in several precedents, non-teaching personnel of respondent
school who were made to handle teaching jobs were actually paid actual compensation. Besides, justice and
equity demand that since the principle of equal work has long been observed in this jurisdiction, then it should
follow that an extra pay for extra work should also be applied.
Significantly, this Court has enunciated in the care of University of Pangasinan Faculty Union v. University of
Pangasinan (127 SCRA 691) that semestral breaks may be considered as "hours worked" under the Rules
implementing the Labor Code and that regular professors and teachers are entitled to ECOLA during the
semestral breaks, their "absence" from work not being of their own will.
The records show that when summons with attached complaint of petitioner for money claims was served on
respondent school on June 14, 1982, said respondent, on the very day, gave petitioner her walking papers.
Respondent did not waste any time in dismissing her in brazen violation of these provisions of the Labor Code, as
amended:

Art. 118 of the Labor Code provides:

Retaliatory measures. It shall be unlawful for an employer to refuse to pay or reduce the wages and benefits,
discharges or in any manner discriminate against any employee who has filed any complaint or instituted any
proceeding under this Title or has testified or is about to testify in such proceedings. (Emphasis supplied)
Thus, too, Art. 249 (f) provides:
Art. 249. Unfair tabor practice of employers. It shall be unlawful for an employer to commit any of the following
unfair labor practice.
xxx xxx xxx
xxx xxx xxx
(f) to dismiss, discharge, or otherwise prejudice or discriminate against an employee for having given or being
about to give testimony under this Code,
xxx xxx xxx
For the aforestated violations, respondent becomes liable under Arts. 289 and 290 of the same Code.
This Court has, time and again, condemned illegal termination of services of employees. In Remerco Garments
Manufacturing v. Minister of Labor and Employment (135 SCRA 167), it declared that while it is true that it is the
sole prerogative of the management to dismiss or lay-off an employee, the exercise of such a prerogative,
however, must be made without abuse of discretion, for what is at stake is not only private respondent's position
(petitioner in this case) but also his means of livelihood.
In arguing for petitioner's entitlement to moral damages, the Solicitor General has aptly summed up her plight. The
Solicitor General has submitted this valid justification for the award of moral damages under Art. 1701 of the Labor
Code:
Petitioner had been the subject of discrimination for over a year before she was ultimately dismissed. When she
justifiably refused to obey the order to report for work for two summers, she was not given her vacation pay for
both occasions. Unlike her, the doctor and dentist who worked in the same clinic, were not required to report
during summer and were given their respective vacation pay. Again, petitioner, unlike the teachers who accepted
extra load, was not given extra compensation when she taught health subjects to 900 students for one year. By
withholding such compensation, respondent school stood to gain at the expense of petitioner, the amount of the
salary which it could have paid to two (2) health teachers. Petitioner's 13th month pay was likewise underpaid
because the basis for computation was only ten months, and not one year as in the case of other regular office
personnel. Finally, petitioner's travails culminated in her unceremonious termination without due process at the
beginning of the school year on June 14, 1982, by the service of her termination paper antedated June 11, 1982.
Termination without due process is specifically prohibited by Rule XIV Section 1 under Section 8 of the Rules
Implementing BP Blg. 130:
Security of tenure and due process. No worker shall be dismissed except for a just or authorized cause
provided by law and after due process.
The series of discriminatory and oppressive acts of respondent school against petitioner invariably makes
respondent liable for moral damages under Art. 1701, which prohibits acts of capital or labor against each other,
and Art. 21 on human relations in relation to Art. 2219 No. 10 and Art. 2220, all of the Civil Code (Philippine
Refining Co., Inc. v. Garcia, 18 SCRA 107). (Rollo, pp. 140-141)
WHEREFORE, the appealed decision of respondent NLRC is hereby SET ASIDE. Private respondent is hereby
ordered to REINSTATE petitioner to her former position without loss of seniority rights and with backwages for
three (3) years from the time of her illegal dismissal; to pay her the regular extra compensation relative to her
teaching health subjects; and to pay her moral damages, the amount of which shall be determined by respondent
NLRC. Let this case be remanded to the NLRC for the proper implementation of this decision.
SO ORDERED.

to the second half of December, 1941, be paid accordingly.

c. Point No. 11.
That Ciriaco Sarmiento, Chief Mate, M/V Marlin, Rafael Santos, Port Engineer, and Lorenzo de la Cruz, Chief
Engineer, M/V Shark who have been suspended without justifiable cause and for union activities, be reinstated
with pay from time of suspension.
d. Point No. 12.
That all officers, engineers and crew members of the motor tugboats "Shark", "Hearing", "Pike" and "Ray", who
have been discharged without justifiable cause and for union activities, be reinstate with pay from time of
discharge. (p. 65-66, Record).
On the basis of these demands, the case was set for hearing and the parties submitted their respective evidence,
both oral and documentary, from June 8,1951, to January 7, 1954. In one of the hearings of the case, the original
intervenor in Union de Obreros Estibadores de Filipinas (UOEF), through counsel, moved for the withdraw al of
said Union from the case, which motion was granted by the Court.

G.R. No. L-9265

April 29, 1957
LUZON STEVEDORING CO., INC., petitioner,
vs.
LUZON MARINE DEPARTMENT UNION and THE HON. MODESTO CASTILLO, THE HON. JOSE S.
BAUTISTA, THE HON. V. JIMENEZ YANSON and THE HON. JUAN L. LANTING, Judges of the Court of
Industrial Relations, respondents.
Perkins, Ponce Enrile and Associates for petitioner.Mariano B. Tuason for respondent Judge of the Court of
Industrial Relations.Sioson, Roldan and Vidanes for respondent union.
FELIX, J.:
This case involves a petition for certiorari filed by the Luzon Stevedoring Co., Inc., to review a resolution dated
June 5, 1955, issued by the Court of Industrial Relations. On September 5, 1955, with leave of court, a
supplemental petition was filed by said petitioner, and both petitions were given due course by resolution of this
Court of September 15, 1955. The facts of the case may be summarized as follows:
On June 21, 1948, herein respondent Luzon Marine Department Union filed a petition with the Court of Industrial
Relations containing several demands against herein petitioner Luzon Stevedoring Co., Inc., among which were
the petition for full recognition of the right of COLLECTIVE bargaining, close shop and check off. However, on July
18, 1948, while the case was still pending with the CIR, said labor union declared a strike which was ruled down
as illegal by this Court in G.R. No. L-2660 promulgated on May 30, 1950. In view of said ruling, the Union filed a
"Constancia" with the Court of Industrial Relations praying that the remaining unresolved demands of the Union
presented in their original petition, be granted. Said unresolved demands are the following:
a. Point No. 2.
That the work performed in excess of eight (8) hours he paid an overtime pay of 50 per cent the regular rate of
pay, and that work performed on Sundays and legal holidays be paid double the regular rate of pay.
b. Point No. 7.
That all officers, engineers and crew members of motor tugboats who have not received their pay corresponding

After the parties had submitted exhaustive memoranda, the trial Judge rendered a decision on February 10, 1955,
finding that the company gave said employees 3 free meals every day and about 20 minutes rest after each
mealtime; that they worked from 6:00 am. to 6:00 p.m. every day including Sundays and holidays, and for work
performed in excess of 8 hours, the officers, patrons and radio operators were given overtime pay in the amount of
P4 each and P2 each for the rest of the crew up to March, 1947, and after said date, these payments were
increased to P5 and P2.50, respectively, until the time of their separation or the strike of July 19, 1948; that when
the tugboats underwent repairs, their personnel worked only 8 hours a day excluding Sundays and holidays; that
although there was an effort on the part of claimants to show that some had worked beyond 6:00 p.m., the
evidence was uncertain and indefinite and that demand was, therefore, denied; that respondent Company, by the
nature of its business and as defined by law (Section 18-b of Commonwealth Act as amended) is considered a
public service operator by the Public Service Commission in its decision in case No. 3035-C entitled "Philippine
Shipowners. Association vs. Luzon Stevedoring Co., Inc., et al."(Exh. 23), and, therefore, exempt from paying
additional remuneration or compensation for work performed on Sundays and legal holidays, pursuant to the
provisions of section 4 of Commonwealth Act No. 444 (Manila Electric Co. vs. Public Utilities Employees
Association, 79 Phil., 408. 44 Off. Gaz., 1760); and ruled that:
For the above reasons, the aforementioned employees are only entitled to receive overtime pay for work rendered
in excess of 8 hours on ordinary days including Sundays and legal holidays.
However, the respondent company has proved to the satisfaction of the Court that it has paid its employees for
such overtime work as shown above Exhs. 1 to 20-B).
It is, therefore, only a matter of computation whether such over time pay by the respondent for overtime services
rendered covers the actual overtime work performed by the employees concerned equivalent to 25 per cent which
is the minimum rate fixed by law in the absence of other proof to justify the granting of more beyond said minimum
rate.
Demands Nos. 11 and 12 regarding the reinstatement to the service of the employees named therein were denied
and respondent Company was only or to pay the separation pay and overtime work rendered by Ciriaco
Sarmiento, Rafael Santos and Lorenzo de la Cruz, after making the pronouncement that their separation or
dismissal was not due to union activities but for valid and legal grounds.
The Luzon Marine Department Union, through counsel, therefore, filed a motion for reconsideration praying that
the decision of February 10, 1955, be modified so as to declare and rule that the members of the Union who had
rendered services from 6:00 a.m. to 6:00 p.m. were entitled to 4 hours' overtime pay; that allotted to the taking of
their meals should not be deducted from the 4 hours of overtime rendered by said employees, that the amounts of
P3 and P2 set aside for the daily meals of the employees be considered as part of their actual compensation in
determining the amount due to said employees separated from the service without just cause be paid their
unearned wages and salaries from the date of their separation up to the time the decision in case L-2660 became
final; and for such other relief as may be just and equitable in the premises.
Luzon Stevedoring Co., Inc. also sought for the reconsideration of the decision only in so far as it interpreted that

the period during which a seaman is aboard a tugboat shall be considered as "working time" for the purpose of the
Eight-Hour-Labor Law.
In pursuance of Section 1 of Commonwealth Act No. 103, as amended by Commonwealth Act No. 254 and further
amended by Commonwealth Act No. 559, the motions for reconsideration were passed upon by the Court en
banc, and on June 6, 1955, a resolution modifying the decision of February 10, 1955, was issued, in the sense
that the 4 hours of overtime work included in the regular daily schedule of work from 6:00 a.m. to 6:00 p.m. should
be paid independently of the so-called "coffee-money", after making a finding that said extra amounts were given
to crew members of some tugboats for work performed beyond 6:00 p.m. over a period of some 16 weeks. The
Company's motion for reconsideration was denied.
From this resolution, the Luzon Stevedoring Co., Inc. filed the present petition for certiorari and when the Court of
Industrial Relations, acting upon said Company's motion for clarification, ruled that the 20 minutes' rest given the
claimants after mealtime should not be deducted from the 4 hours of overtime worked performed by said
claimants, petitioner filed a supplemental petition for certiorari dated September 5, 1955, and both petitions were
given due course by this Court.
Respondent Luzon Marine Labor Union filed within the reglementary period a motion to dismiss, which this Court
considered as an answer by resolution of October 14, 1955, alleging that the decision, resolution and order of the
Court of Industrial Relations sought to be reviewed by petitioner do not present any question of law, the issues in
said CIR case No. 147-V being purely factual. The respondent Judges of the Court of Industrial Relations,
represented by counsel, timely filed an answer likewise asserting that there could have been no question of law
involved or error of law committed by the said Judges in the resolutions appealed from, same having been based
on purely findings of fact.
In this instance, petitioner does not seek to alter the lower court's finding that the regular daily schedule of work of
the members of the herein respondent Union was from 6:00 a.m. to 6:00 p.m. Petitioner, however, submits several
"issues" which We will proceed to discuss one after the other. They are the following:
I. Is the definition for "hours of work" as presently applied to dryland laborers equally applicable to seamen? Or
should a different criterion be applied by virtue of the fact that the seamen's employment is completely different in
nature as well as in condition of work from that of a dryland laborer?
Petitioner questions the applicability to seamen of the interpretation given to the phrase "hours of work" for the
purpose of the Eight-Hour Labor Law, insinuating that although the seamen concerned stayed in petitioner's
tugboats, or merely within its compound, for 12 hours, yet their work was not continuous but interrupted or broken.
It has been the consistent stand of petitioner that while it is true that the workers herein were required to report for
work at 6:00 a.m. and were made to stay up to 6:00 p.m., their work was not continuous and they could have left
the premises of their working place were it not for the inherent physical impossibility peculiar to the nature of their
duty which prevented them from leaving the tugboats. It is the Company's defense that a literal interpretation of
what constitutes non-working hours would result in absurdity if made to apply to seamen aboard vessels in bays
and rivers, and We are called upon to make an interpretation of the law on "non-working hours" that may
comprehend within its embrace not only the non-working hours of laborers employed in land jobs, but also of that
particular group of seamen, i.e., those employed in vessels plying in rivers and bays, since admittedly there is no
need for such ruling with respect to officers and crew of interisland vessels which have aboard 2 shifts of said men
and strictly follow the 8-hour working period.

meaning and scope of the term "working place" used therein. As We understand this term, a laborer need not
leave the premises of the factory, shop or boat in order that his period of rest shall not be counted, it being enough
that he "cease to work", may rest completely and leave or may leave at his will the spot where he actually stays
while working, to go somewhere else, whether within or outside the premises of said factory, shop or boat. If these
requisites are complied with, the period of such rest shall not be counted.
In the case at bar We do not need to look into the nature of the work of claimant mariners to ascertain the truth of
petitioners allegation that this kind of seamen have had enough "free time", a task of which We are relieved, for
although after an ocular inspection of the working premises of the seamen affected in this case the trial Judge
declared in his decision that the Company gave the complaining laborers 3 free meals a day with a recess of 20
minutes after each meal, this decision was specifically amended by the Court en banc in its Resolution of June 6,
1955, wherein it held that the claimants herein rendered services to the Company from 6:00 a.m. to 6:00 p.m.
including Sundays and holidays, which implies either that said laborers were not given any recess at all, or that
they were not allowed to leave the spot of their working place, or that they could not rest completely. And such
resolution being on a question essentially of fact, this Court is now precluded to review the same (Com. Act No.
103, Sec. 15, as amended by Sec. 2 of Com. Act No. 559; Rule 44 of the Rules of Court; Kaisahan Ng Mga
Manggagawa sa Kahoy sa Filipinas vs. Gotamco Sawmill, 80 Phil., 521; Operators, Inc. vs. Pelagio, 99 Phil, 893,
and others).
II. Should a person be penalized for following an opinion issued by the Secretary of Justice in the absence of any
judicial pronouncement whatsoever?
Petitioner cites Opinion No. 247, Series of 1941 of the Secretary of Justice to a query made by the Secretary of
Labor in connection with a similar subject matter as the one involved, in this issue, but that opinion has no bearing
on the case at bar because it refers to officers and crew on board interisland boats whose situation is different
from that of mariners or sailors working in small tugboats that ply along bays and rivers and have no cabins or
places for persons that man the same. Moreover, We can not pass upon this second issue because, aside from
the fact that there appears nothing on record that would support petitioner's assertion that in its dealing with its
employees, it was guided by an opinion of the Secretary of Justice, the issue involves a mere theoretical question.
III. When employees with full knowledge of the law, voluntarily agreed to work for so many hours in consideration
of a certain definite wage, and continue working without any protest for a period of almost two years, is said
compensation as agreed upon legally deemed and retroactively presumed to constitute full payment for all
services rendered, including whatever overtime wages might be due? Especially so if such wages, though
received years before the enactment of the Minimum Wage Law, were already set mostly above said minimum
wage?
IV. The members set of respondent Union having expressly manifested acquiescence over a period of almost two
years with reference to the sufficiency of their wages and having made no protest whatsoever with reference to
said compensation does the legal and equitable principle of estoppel operate to bar them from making a claim for,
or making any recovery of, back overtime compensation?
We are going to discuss these two issues jointly. Section 6 of Commonwealth Act No. 444 provides:
Sec. 6. Any agreement or contract between the employer and the laborer or employee contrary to the provisions of
this Act shall be null and void ab initio.

The requisites contained in this section are further implemented by contemporary regulations issued by
administrative authorities (Sections 4 and 5 of Chapter III, Article 1, Code of Rules and Regulations to Implement
the Minimum Wage Law).

In the case of the Manila Terminal Co. vs. Court of Industrial Relations et al., 91 Phil., 625, 48 Off. Gaz., 2725, this
Court held:
The principles of estoppel and laches cannot be, invoked against employees or laborers in an action for the
recovery of compensation for past overtime work. In the first place, it would be contrary to the spirit of the EightHour Labor Law, under which. as already seen, the laborers cannot waive their right to extra compensation. In the
second place, the law principally obligates the employer to observe it, so much so that it punishes the employer for
its violation and leaves the employee free and blameless. In the third place, the employee or laborer is in such a
disadvantageous position as to be naturally reluctant or even apprehensive in asserting a claim which may cause
the employer to devise a way for exercising his right to terminate the employment.

For the purposes of this case, We do not need to set for seamen a criterion different from that applied to laborers
on land, for under the provisions of the above quoted section, the only thing to be done is to determine the

Moreover, if the principle of estoppel and laches is to be applied, it would bring about a situation whereby the
employee or laborer, can not expressly renounce the right to extra compensation under the Eight-Hour Labor Law,

Section 1 of Commonwealth Act No. 444, known as the Eight-Hour Labor Law, provides:
SEC. 1. The legal working day for any person employed by another shall be of not more than eight hours daily.
When the work is not continuous, the time during which the laborer is not working AND CAN LEAVE HIS
WORKING PLACE and can rest completely, shall not be counted.

may be compelled to accomplish the same thing by mere silence or lapse of time, thereby frustrating the purpose
of the law by indirection.

25. Antonio Belbes

seaman

67.50

26. Benjamin Aguirre

quartermaster

82.50

This is the law on the matter and We certainly adhere, to it in the present case. We deem it, however, convenient
to say a few words of explanation so that the principle enunciated herein may not lead to any misconstruction of
the law in future cases. There is no question that the right of the laborers to overtime pay cannot be waived. But
there may be cases in which the silence of the employee or laborer who lets the time go by for quite a long period
without claiming or asserting his right to overtime compensation may favor the inference that he has not worked
any such overtime or that his extra work has been duly compensated. But this is not so in the case at bar. The
complaining laborers have declared that long before the filing of this case, they had informed Mr. Martinez, a sort
of overseer of the petitioner, that they had been working overtime and claiming the corresponding compensation
therefor, and there is nothing on record to show that the claimants, at least the majority of them, had received
wages in excess of the minimum wage later provided by Republic Act No. 602, approved April 6, 1951. On the
contrary, in the decision of the trial Judge, it appears that 34 out of the 58 claimants received salaries less than the
minimum wage authorized by said Minimum Wage Law, to wit:
Per month

27. Emilio Anastasio

quartermaster

82.50

28. Baltazar Labrada

oiler

82.50

29. Emeterio Magallanes

seaman

67.50

30. Agripino Laurente

quartermaster

82.50

31. Roberto Francisco

oiler

82.50

32. Elias Matrocinio

seaman

82.50

33. Baltazar Vega

seaman

67.50

34. Jose Sanchez

oiler

82.50

1. Ambrosio Taada ..
oiler
but after passing the examinations his wages were
increased to P225 per month;

P82.50

Consequently, for lack of the necessary supporting evidence for the petitioner, the inference referred to above
cannot be drawn in this case.

2. Patricio Santiago ..
quartermaster
but after passing the examinations his wages were
increased to P225 per month;

82.50

V. Granting, without conceding, that any overtime pay in arrears is due, what is the extent and rule of retro-activity
with reference to overtime pay in arrears as set forth and established by the precedents and policies of the Court
of Industrial Relations in past decisions duly affirmed by the Honorable Supreme Court?

3. Fidelino Villanueva

82.50

oiler

4. Pedro Filamor
quartermaster
then his wage was reduced to P67.50 per month as cook;

82.50

5. Emiliano Irabon .
seaman
then his wage was reduced to P60 and he stayed for 1
month only; it was increased again to P67.50;

82.50

6. Juanito de Luna

oiler

82.50

7. Benigno Curambao

oiler

82.50

8. Salvador Mercadillo

oiler

82.50

9. Nicasio Sta. Lucia

cook

82.50

10. Damaso Arciaga

seaman

82.50

11. Leonardo Patnugot

oiler

82.50

12. Bienvenido Crisostomo

oiler

82.50

13. Isidro Malabanan

cook

82.50

14. Saturnino Tumbokon

seaman

67.50

15. Bonifacio Cortez

quartermaster

82.50

16. Victorio Carillo

cook

67.50

17. Francisco Atilano

cook

67.50

18. Gualberto Legaspi

seaman

67.50

19. Numeriano Juanillo

quartermaster

82.50

20. Moises Nicodemus

quartermaster

82.50

21. Arsenio Indiano

seaman

82.50

22. Ricardo Autencio

oiler

82.50

23. Mateo Arciaga

seaman

67.50

24. Romulo Magallanes

quartermaster

82.50

VI. Is the grant of a sizeable amount as back overtime wages by the Court of Industrial Relations in consonance
with the dictates of public policy and the avowed national and government policy on economic recovery and
financial stability?
In connection with issue No. 5, petitioner advances the theory that the computation of the overtime payment in
arrears should be based from the filing of the petition. In support of this contention, petitioner cites the case of
Gotamco Lumber Co. vs- Court of Industrial Relations, 85 Phil., 242; 47 Off. Gaz., 3421. This case is not in point;
it merely declares that Commonwealth Act No. 444 imposes upon the employer the duty to secure the permit for
overtime work, and the latter may not therefore be heard to plead his own negligence as exemption or defense.
The employee in rendering extra services at the request of his employer has a right to assume that the latter has
complied with the requirements of the law and therefore has obtained the required permission from the
Department of Labor (47 Off, Gaz., 3421). The other decisions of the Court of Industrial Relations cited by
petitioner, to wit: Cases 6-V, 7-V and 8-V, Gotamco & Co., Dy Pac & Co., Inc. and D. C. Chuan; Case 110-V,
National Labor Union vs. Standard Vacuum Oil Co.; Case No. 76-v, Dee Cho Workers, CLO vs. Dee Cho Lumber
Co., and Case No. 70-V, National Labor Union vs. Benguet Consolidated Mining Co., do not seem to have
reached this Court and to have been affirmed by Us.
It is of common occurrence that a workingman has already rendered services in excess of the statutory period of 8
hours for some time before he can be led or he can muster enough courage to confront his employer with a
demand for payment thereof. Fear of possible unemployment sometimes is a very strong factor that gags the man
from asserting his right under the law and it may take him months or years before he could be made to present a
claim against his employer. To allow the workingman to be compensated only from the date of the filing of the
petition with the court would be to penalize him for his acquiescence or silence which We have declared in the
case of the Manila Terminal Co. vs. CIR, supra, to be beyond the intent of the law. It is not just and humane that
he should be deprived of what is lawfully his under the law, for the true intendent of Commonwealth Act No. 444 is
to compensate the worker for services rendered beyond the statutory period and this should be made to retroact
to the date when such services were actually performed.
Anent issue No. VI, petitioner questions the reasonableness of the law providing for the grant of overtime wages. It
is sufficient for Us to state here that courts cannot go outside of the field of interpretation so as to inquire into the
motive or motives of Congress in enacting a particular piece of legislation. This question, certainly, is not within
Our province to entertain.
It may be alleged, however, that the delay in asserting the right to back overtime compensation may cause an
unreasonable or irreparable injury to the employer, because the accumulation of such back overtime wages may

become so great that their payment might cause the bankruptcy or the closing of the business of the employer
who might not be in a position to defray the same. Perhaps this situation may occur, but We shall not delve on it
this time because petitioner does not claim that the payment of the back overtime wages it is ordered to pay to its
claimant laborers will cause the injury it foresees or force it to close its business, a situation which it speaks of
theoretically and in general.
VII. Should not a Court of Industrial Relations' resolution, en banc, which is clearly unsupported in fact and in law,
patently arbitrary and capricious and absolutely devoid of sustaining reason, be declared illegal? Especially so, if
the trial court's decision which the resolution en banc reversed, is most detailed, exhaustive and comprehensive in
its findings as well as most reasonable and legal in its conclusions? This issue was raised by petitioner in its
supplemental petition and We have this much to say. The Court of Industrial Relations has been considered "a
court of justice" (Metropolitan Transportation Service vs. Paredes, * G.R. No. L-1232, prom. January 12, 1948),
although in another case. We said that it is "more an administrative board than a part of the integrated judicial
system of the nation" (Ang Tibay vs. Court of Industrial Relations, 69 Phil., 635). But for procedural purposes, the
Court of Industrial Relations is a court with well-defined powers vested by the law creating it and with such other
powers as generally pertain to a court of justice (Sec. 20, Com. Act No. 103). As such, the general rule that before
a judgment becomes final, the Court that rendered the same may alter or modify it so as to conform with the law
and the evidence, is applicable to the Court of Industrial Relations (Connel Bros. Co.(Phil.) vs. National Labor
Union, G.R. No. L-3631, prom. January 30, 1956). The law also provides that after a judge of the Court of
Industrial Relations, duly designated by the Presiding Judge therein to hear a particular case, had rendered a
decision, any agrieved party may request for reconsideration thereof and the judges of said Court shall sit
together, the concurrence of the 3 of them being necessary for the pronouncement of a decision, order or award
(See. 1, Com. Act No. 103). It was in virtue of these rules and upon motions for reconsideration presented by both
parties that resolution subject of the present petition was issued, the Court en banc finding it necessary to modify
a part of the decision of February 10, 1955, which is clearly within its power to do.
On the other hand, the issue under consideration is predicated on a situation which is not obtaining in the case at
bar, for, it presupposes that the resolutions en banc of the respondent Court "are clearly unsupported in fact and in
law, patently arbitrary and capricious and absolutely devoid of any sustaining reason", which does not seem to be
the case as a matter of fact.
Wherefore, and on the strength of the foregoing consideration, the resolutions of the Court of Industrial Relations
appealed from are hereby affirmed, with costs against petitioner. It is so ordered.

various capacities private respondent Eduardo Monsale. His fealty to his employer for ten (10) continuous years
earned for him an award, given on 28 June 1988, for dedicated service to the Stolt-Nielsen fleet. On 21 October
1988, SNMSI and private respondent executed a Contract of Shipboard Employment and Crew Agreement under
which the latter, this time, was to serve as an engine fitter on board Stolt Crown Vessel for a period of ten months
commencing on 09 December 1988. The contract provided that Monsale would get a monthly basic pay of five
hundred twenty-five U.S. dollars (US$525.00), fixed overtime pay of two hundred fifty U.S. dollars (US$250.00),
and longevity pay of sixty U.S. dollars (US$60.00), with leave benefits of six (6) days per month. 3
On 09 December 1988, private respondent boarded the Stolt Crown vessel. Captain Erkiaga, a Spanish national,
instantly ordered him to perform work connected with the berthing and unberthing maneuvers on the upper deck of
the ship. Private respondent followed the captain's order despite his contract that called for a different assignment.
Uneasy, however, about the change in his job detail, private respondent inquired from Captain Erkiaga if his
transfer had been communicated to the SNMSI. He was told that the new work assignment had been
communicated to Stolt-Nielsen, Inc., which thereupon radioed back its approval.
On 29 January 1989, a Sunday and his scheduled rest day, private respondent was ordered to clean the deck
cargo tank using "toline" chemical, a toxic substance detrimental to the respiratory system. He was not provided
with a protective mask. The risk to his health notwithstanding, private respondent again followed Captain Erkiaga's
order. He worked for seventeen (17) hours from 5:00 that morning until 10:00 in the evening.
Due to his exposure to the pungent chemical, private respondent suffered from chest pains and dizziness. On 01
February 1989, he was unable to report for work but he informed First Engineer Juan J. Ruiz about his physical
condition. Ruiz, unfortunately, neither mentioned the matter to Captain Erkiaga nor summoned the vessel's
resident physician to attend to him. Captain Erkiaga interpreted private respondent's failure to work to be an act of
disobedience and immediately ordered him, along with some other seamen, to report on deck "within five minutes"
to clean up the deck cargo tank. Despite his illness, private respondent tried to reach the deck on time but he was
unable to make it. The incident was entered in the log book; viz:
0830 Fitter Eduardo Monsale and Alfonso Garino have refused to work in the tank cleaning when ordered to do
so.
0845 They are informed of the above entry in the log book.
0845 They comment that they are not refusing to go to work but only to work in the tanks. They are informed their
contract is terminated as to today, for repeated disobedience to lawful orders of their superiors. 4
On 07 February 1989, private respondent was repatriated to the Philippines. Upon arrival in Manila two days later,
private respondent went to the manning agent's physician, Dr. Fidel Chua, who found him to be suffering from
bronchitis. On 10 February 1989, he made a written report on the circumstances of his case, furnishing with a
copy thereof the manning agent's Capt. Maximiano Hernandez. The latter confirmed the termination of private
respondent's employment.

G.R. No. 105396 November 19, 1996

STOLT-NIELSEN MARINE SERVICES (PHILS.), INC. and STOLT-NIELSEN, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION
and EDUARDO MONSALE, respondents.
VITUG, J.:
In a petition for certiorari, Stolt-Nielsen Marine Services (Phils.), Inc., and Stolt-Nielsen Inc., seek to annul and set
aside the resolutions of 27 January 1992 and 25 March 1992 1 of the National Labor Relations Commission
("NLRC") affirming the decision of 20 April 1990 2 of the Philippine Overseas Employment Administration ("POEA"),
in POEA Case No. (M) 89-03-208, which has held both petitioners (herein) jointly and severally liable for various
monetary awards in favor of private respondent, Eduardo S. Monsale, their hired seaman.
Petitioner Stolt-Nielsen Marine Services (Phils.), Inc. (SNMSI for brevity), on 26 May 1977, took to its employ in

On 13 March 1989, private respondent went to the bank to get his salary for the months of January and February
1989. He learned that his salary allotments were not remitted by petitioners. On 08 March 1989, private
respondent filed with the POEA a complaint for illegal dismissal and contract substitution.
The POEA, ruling in favor of private respondent, held:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents Stolt Nielsen Marine
Services Philippines and Stolt Nielsen, Inc. to pay jointly and severally complainant Eduardo S. Monsale the
following:
1. FIVE THOUSAND SIX HUNDRED SIXTEEN US DOLLARS (US$5,616.00) or its equivalent in Philippine
Currency at the time of actual payment, representing complainant's salaries for the unexpired portion of his
employment contract;
2. FOUR HUNDRED NINETY NINE AND 20/100 US DOLLARS (US$499.20) or its equivalent in Philippine
Currency at the time of actual payment, representing complainant's unremitted salary for the month of January
1989; and
3. TWO THOUSAND TWO HUNDRED FIFTY US DOLLARS (US$2,250.00) or its equivalent in Philippine
Currency at the time of actual payment, representing complainant's fixed overtime pay.
All other claims are dismissed for lack of merit.

SO ORDERED. 5
On appeal, the NLRC, in its resolution of 27 January 1992, affirmed the POEA decision and ruled that the POEA
had not gravely abused its discretion. The NLRC added that petitioners were afforded ample opportunity to
present their side in the proceedings before the POEA. Petitioners' motion for reconsideration was denied.
In the petition for certiorari, instant, several submissions have been made but, as so encapsulized by the Solicitor
General, the controversy really revolves around the following issues:
I. WHETHER OR NOT PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED.
II. WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN AWARDING PRIVATE RESPONDENT FIXED OVERTIME (PAY) IN
THE AMOUNT OF US$2,500.00.
III. WHETHER OR NOT THE PRESENT CONTROVERSY SHOULD HAVE BEEN REFERRED TO THE
GRIEVANCE COMMITTEE PROVIDED UNDER THE COLLECTIVE BARGAINING AGREEMENT. 6
It is averred that public respondents have failed to aptly consider petitioners' evidence showing private
respondent's "repeated refusal to obey the orders of the master," amounting "to serious misconduct and/or gross
insubordination or disobedience," 7 to be the real cause for the questioned dismissal. The argument is anchored on
the evidentiary value of the log book entries, 8 and in the holdings of the Court in Haverton Shipping Ltd. vs.
NLRC 9 and Abacast Shipping and Management Agency, Inc. vs. NLRC. 10
It should be stressed at the outset that the employer has the burden of proving that the dismissal of an employee
is for a just cause. 11 In an attempt to discharge this burden, petitioners have merely presented, by way of annexes
to their position paper before the POEA and reply to private respondent's position paper, copies of log book
abstracts. In Abacast Shipping, the Court has ruled that entries in the ship's log book are prima facie evidence of
the incident only if the logbook itself containing such entries or photocopies of the pertinent pages thereof are
presented in evidence; hence
The log book is a respectable record that can be relied upon to authenticate the charges filed and the procedure
taken against the employees prior to their dismissal. Curiously, however, no entry from such log book was
presented at all in this case. What was offered instead was the shipmaster's report, which was later claimed to be
a collation of excerpts from such book.
It would have been a simple matter, considering the ease of reproducing the same, to make photocopies of the
pertinent pages of the log book to substantiate the petitioner's contention. Why this was not done is something that
reasonably arouses the curiosity of this Court and suggests that there probably were no entries in the log book at
all that could have proved the alleged offenses of the private respondents. 12
The Court, no different from public respondents, finds it hard to believe, let alone to conclude, that private
respondent has been guilty of willful disobedience to warrant dismissal. Willful disobedience of the employer's
lawful order envisages the concurrence of at least two requisites: (a) The employee's assailed conduct must have
been intentional and characterized by a "wrongful and perverse attitude;" and (b) the order violated must have
been reasonable, lawful, and made known to the employee and should pertain to the duties which he has been
engaged to discharge. 13 It is possible that private respondent may have indeed shown some reluctance to the
captain's order; nevertheless, he ultimately did comply with the orders of the captain. Not the least insignificant is
that the Captain's assignments have not been the contractually assigned tasks of private respondent.
Petitioners call attention to the "mutual assistance" proviso of the collective bargaining agreement; viz:
Sec. 6. Mutual assistance shall be exercised by all officers/ratings regardless of rank and position assisting each
other in the working of the vessel both in engine room, deck and tank cleaning included. (sic) 14
As has been so correctly pointed out by the POEA, however, the above provision, falling under the general item,
"Working Hours," is primarily for properly computing extra compensation, and it is not intended to coerce, compel,
or force the crew members to perform jobs other than what they have been contracted for. 15 The Court, even then,
shares POEA's observation that
Respondent's CBA provision on "mutual assistance" should be applied with leniency. If respondent's defense will

be given credence, then the job designations in the employment contract will be rendered inutile. All other
members of the crew can be "requested" to perform jobs other than what they are contracted for and if they
refuse, they could be terminated for insubordination. Such defense, definitely, cannot be allowed for this is in
square defiance (of) the Constitutional mandate of protection to labor. 16
Providing assistance to other members of the crew in their jobs on board a vessel when needed or required is
violative neither of labor laws nor of the employment contract except when such assistance becomes regularly
imposed.
In his case, private respondent was made to perform various tasks other than his contractually assigned work from
the very moment he boarded the vessel.
Even when an employee is found to have transgressed the employer's rules, in the actual imposition of penalties
upon the erring employee, due consideration must still be given to his length of service and the number of
violations committed during his employ. 17 The penalty must in no case be unduly harsh and grossly
disproportionate. 18
The law so requires, as a vital component of due process, an observance of the twin requirements of notice and
hearing before the dismissal of an employee.
Thus, it could not be enough for his dismissal that private respondent was "advised of his infractions and given the
opportunity to explain his side" after he had supposedly "refused to assist in the berthing and unberthing
maneuvers," and that when he refused to clean the cargo tank, the "pertinent portion of the CBA on mutual
assistance was read to him." 19 The procedure was far short of the legal mandate.
The Court has once said:
On the issue of due process . . . , the law requires the employer to furnish the worker whose employment is sought
to be terminated a written notice containing a statement of the cause or causes for termination and shall afford him
ample opportunity to be heard and to defend himself with the assistance of a representative. Specifically, the
employer must furnish the worker with two (2) written notices before termination of employment can be legally
effected: (a) notice which apprises the employee of the particular acts or omissions for which his dismissal is
sought; and (b) the subsequent notice which informs the employee of the employer's decision to dismiss him. 20
In another case 21 the Court has explained:
An employee cannot just be separated from his employment without according him his constitutional right of due
process, consisting of the proper notice and hearing. No notice of any form, apprising of the proffered charges,
was served on petitioner, much less was a hearing conducted wherein he could have defended himself. The fact
that the defense interposed at the hearing would be outlandish or pure nonsense, is not a ground to cut short the
procedure for dismissal. As this Court ruled in Seahorse Maritime Corporation vs. National Labor Relations
Commission, 173 SCRA 390 (1989), that before a seaman can be dismissed and discharged from the vessel, it is
required that he be given a written notice regarding the charges against him and that he be afforded a formal
investigation where he could defend himself personally or through a representative. Fear of any possible trouble
that might be caused by the dismissed employee on board the vessel upon being informed of his dismissal is not a
reason to dispense with the requirement. 22
We agree with petitioners, however, that private respondent is not entitled to the overtime pay awarded to him by
the POEA. The ruling in National Shipyards and Steel corporation vs. CIR and Malondras 23 is in point, and there
the Court, through Justice J.B.L. Reyes, has said:
We can not agree with the Court below that respondent Malondras should be paid overtime compensation for
every hour in excess of the regular working hours that he was on board his vessel or barge each day, irrespective
of whether or not he actually put in work during those hours. Seamen are required to stay on board their vessels
by the very nature of their duties, and it is for this reason that, in addition to their regular compensation, they are
given free living quarters and subsistence allowances when required to be on board. It could not have been the
purpose of our law to require their employers to pay them overtime even when they are not actually working:
otherwise, every sailor on board a vessel would be entitled to overtime for sixteen hours each day, even if he had
spent all those hours resting or sleeping in his bunk, after his regular tour of duty. The correct criterion in
determining whether or not sailors are entitled to overtime pay is not, therefore, whether they were on board and
can not leave ship beyond the regular eight working hours a day, but whether they actually rendered service in

excess of said number of hours. 24

Anent the matter on jurisdiction, the issue was mooted by petitioners' active participation in the proceedings below.
In Marquez vs. Secretary of Labor, 25 the Court said:
. . . . The active participation of the party against whom the action was brought, coupled with his failure to object to
the jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of
that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on
impugning the court or body's jurisdiction. 26
WHEREFORE, the herein questioned resolutions of the NLRC are AFFIRMED subject to the modification that the
award of overtime pay in the amount of Two Thousand Two Hundred Fifty U.S. dollars (US$2,250.00) is deleted.
No costs.
SO ORDERED.

The records disclose that although there was a one-hour mealtime, petitioner nevertheless credited the workers
with eight hours of work for each shift and paid them for the same number of hours. However, since 1953,
whenever workers in one shift were required to continue working until the next shift, petitioner instead of crediting
them with eight hours of overtime work, has been paying them for six hours only, petitioner that the two hours
corresponding to the mealtime periods should not be included in computing compensation. On the other hand,
respondent National Textile Workers Union whose members are employed at the NDC, maintained the opposite
view and asked the Court of Industrial Relations to order the payment of additional overtime pay corresponding to
the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19, 1959, holding that mealtime
should be counted in the determination of overtime work and accordingly ordered petitioner to pay P101,407.96 by
way of overtime compensation. Petitioner filed a motion for reconsideration but the same was dismissed by the
CIR en banc on the ground that petitioner failed to furnish the union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no jurisdiction over claims for
overtime compensation and, secondary that the CIR did not make "a correct appraisal of the facts, in the light of
the evidence" in holding that mealtime periods should be included in overtime work because workers could not
leave their places of work and rest completely during those hours.
In support of its contention that the CIR lost its jurisdiction over claims for overtime pay upon the enactment of the
Industrial Peace Act (Republic Act No. 875), petitioner cites a number of decisions of this Court. On May 23, 1960,
however, We ruled in Price Stabilization Corp. v. Court of Industrial Relations, et al., G.R. No. L-13206, that
Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in express terms,
is that where the employer-employee relationship is still existing or is sought to be reestablished because of its
wrongful severance, (as where the employee seeks reinstatement) the Court of Industrial Relations has
jurisdiction over all claims arising out of, or in connection with the employment, such as those related to the
Minimum Wage Law and the Eight-Hour Labor Law. After the termination of their relationship and no reinstatement
is sought, such claims become mere money claims, and come within the jurisdiction of the regular courts,
We are aware that in 2 cases, some statements implying a different view have been made, but we now hold and
declare the principle set forth in the next preceding paragraph as the one governing all cases of this nature.
This has been the constant doctrine of this Court since May 23, 1960.1

G.R. No. L-15422

November 30, 1962
NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS UNION, respondents.
Government Corporate Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for petitioner.Eulogio R. Lerum
for respondent National Textile Workers Union.Mariano B. Tuason for respondent Court of Industrial Relations.
REGALA, J.:
This is a case for review from the Court of Industrial Relations. The pertinent facts are the following:
At the National Development Co., a government-owned and controlled corporation, there were four shifts of work.
One shift was from 8 a.m. to 4 p.m., while the three other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10
p.m. and, finally, from 10 p.m. to 6 a.m. In each shift, there was a one-hour mealtime period, to wit: From (1) 11
a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8 p.m. for those working
between 2 p.m. and 10 p.m.

A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v. Manila Railroad Co., et al., G.R.
No. L-17905, May 25, 1962, in which We held that, for such jurisdiction to come into play, the following requisites
must be complied with: (a) there must exist between the parties an employer-employee relationship or the
claimant must seek his reinstatement; and (b) the controversy must relate to a case certified by the President to
the CIR as one involving national interest, or must arise either under the Eight-Hour Labor Law, or under the
Minimum Wage Law. In default of any of these circumstances, the claim becomes a mere money claim that comes
under the jurisdiction of the regular courts. Here, petitioner does not deny the existence of an employer-employee
relationship between it and the members of the union. Neither is there any question that the claim is based on the
Eight-Hour Labor Law (Com. Act No. 444, as amended). We therefore rule in favor of the jurisdiction of the CIR
over the present claim.
The other issue raised in the appeal is whether or not, on the basis of the evidence, the mealtime breaks should
be considered working time under the following provision of the law;
The legal working day for any person employed by another shall be of not more than eight hours daily. When the
work is not continuous, the time during which the laborer is not working and can leave his working place and can
rest completely shall not be counted. (Sec. 1, Com. Act No. 444, as amended. Emphasis ours.)
It will be noted that, under the law, the idle time that an employee may spend for resting and during which he may
leave the spot or place of work though not the premises 2 of his employer, is not counted as working time only
where the work is broken or is not continuous.

The determination as to whether work is continuous or not is mainly one of fact which We shall not review as long
as the same is supported by evidence. (Sec. 15, Com. Act No. 103, as amended, Philippine Newspaper Guild v.
Evening News, Inc., 86 Phil. 303).
That is why We brushed aside petitioner's contention in one case that workers who worked under a 6 a.m. to 6
p.m. schedule had enough "free time" and therefore should not be credited with four hours of overtime and held
that the finding of the CIR "that claimants herein rendered services to the Company from 6:00 a.m. to 6:00 p.m.
including Sundays and holidays, . . . implies either that they were not allowed to leave the spot of their working
place, or that they could not rest completely" (Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et
al., G.R. No. L-9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is to what constitutes compensable work, rather the
question is one of fact depending upon particular circumstances, to be determined by the controverted in cases.
(31 Am. Jurisdiction Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner company was continuous and did not permit employees
and laborers to rest completely is not without basis in evidence and following our earlier rulings, shall not disturb
the same. Thus, the CIR found:
While it may be correct to say that it is well-high impossible for an employee to work while he is eating, yet under
Section 1 of Com. Act No. 444 such a time for eating can be segregated or deducted from his work, if the same is
continuous and the employee can leave his working place rest completely. The time cards show that the work was
continuous and without interruption. There is also the evidence adduced by the petitioner that the pertinent
employees can freely leave their working place nor rest completely. There is furthermore the aspect that during the
period covered the computation the work was on a 24-hour basis and previously stated divided into shifts.
From these facts, the CIR correctly concluded that work in petitioner company was continuous and therefore the
mealtime breaks should be counted as working time for purposes of overtime compensation.
Petitioner gives an eight-hour credit to its employees who work a single shift say from 6 a.m. to 2 p.m. Why cannot
it credit them sixteen hours should they work in two shifts?
There is another reason why this appeal should dismissed and that is that there is no decision by the CIR en banc
from which petitioner can appeal to this Court. As already indicated above, the records show that petitioner's
motion for reconsideration of the order of March 19, 1959 was dismissed by the CIR en banc because of
petitioner's failure to serve a copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No. 103, states:
The movant shall file the motion (for reconsideration), in six copies within five (5) days from the date on which he
receives notice of the order or decision, object of the motion for reconsideration, the same to be verified under
oath with respect to the correctness of the allegations of fact, and serving a copy thereof personally or by
registered mail, on the adverse party. The latter may file an answer, in six (6) copies, duly verified under oath.
(Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We sustained the dismissal of a
motion for reconsideration filed outside of the period provided in the rules of the CIR. A motion for reconsideration,
a copy of which has not been served on the adverse party as required by the rules, stands on the same footing.
For "in the very nature of things, a motion for reconsideration against a ruling or decision by one Judge is in effect
an appeal to the Court of Industrial Relations, en banc," the purpose being "to substitute the decision or order of a
collegiate court for the ruling or decision of any judge." The provision in Commonwealth Act No. 103 authorizing
the presentation of a motion for reconsideration of a decision or order of the judge to the CIR, en banc and not
direct appeal therefore to this Court, is also in accord with the principal of exhaustion of administrative remedies
before resort can be made to this Court. (Broce, et al., v. The Court of Industrial Relations, et al., G.R. No. L12367, October 29, 1959).
Petitioner's motion for reconsideration having been dismissed for its failure to serve a copy of the same on the
union, there is no decision of the CIR en banc that petitioner can bring to this Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are hereby affirmed and the

appeal is dismissed, without pronouncement as to costs.

On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly
salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance Department
working on shifts, a change in work schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their work and
break time schedules will be maintained as it is now. 1
Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the 30minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for unfair
labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime Darby
International Tire Co., Inc. v. NLRC. 2 However, the Labor Arbiter dismissed the complaint on the ground that the
change in the work schedule and the elimination of the 30-minute paid lunch break of the factory workers
constituted a valid exercise of management prerogative and that the new work schedule, break time and one-hour
lunch break did not have the effect of diminishing the benefits granted to factory workers as the working time did
not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid
during their lunch break even if they were no longer "on call" or required to work during the break. He also ruled
that the decision in the earlier Sime Darby case 3 was not applicable to the instant case because the former
involved discrimination of certain employees who were not paid for their 30-minute lunch break while the rest of
the factory workers were paid; hence, this Court ordered that the discriminated employees be similarly paid the
additional compensation for their lunch break.

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES
ASSOCIATION (ALU-TUCP), respondents.
BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding their paid lunch break
constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of
monthly salaried employees of petitioner at its Marikina factory. Prior to the present controversy, all company
factory workers in Marikina including members of private respondent union worked from 7:45 a.m. to 3:45 p.m.
with a 30-minute paid "on call" lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the
Labor Arbiter and dismissed the appeal. 4 However, upon motion for reconsideration by private respondent, the
NLRC, this time with two (2) new commissioners replacing those who earlier retired, reversed its earlier decision
of 20 April 1994 as well as the decision of the Labor Arbiter. 5 The NLRC considered the decision of this Court in
the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay "the money value of
these covered employees deprived of lunch and/or working time breaks." The public respondent declared that the
new work schedule deprived the employees of the benefits of a time-honored company practice of providing its
employees a 30-minute paid lunch break resulting in an unjust diminution of company privileges prohibited by Art.
100 of the Labor Code, as amended. Hence, this petition alleging that public respondent committed grave abuse
of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice
in the implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45
a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of
benefits when the 30-minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime
Darby case affirming the decision of the NLRC, petitioner was authorized to discontinue the practice of having a
30-minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent management
prerogative of determining and fixing the work schedule of its employees which is expressly recognized in the
collective bargaining agreement between petitioner and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that the
petitioner be granted, alleging that the 14 August 1992 memorandum which contained the new work schedule was
not discriminatory of the union members nor did it constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on

their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient
conduct of its business operations and its improved production. 6 It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs during that period as they
were "on call." Even if denominated as lunch break, this period could very well be considered as working time
because the factory employees were required to work if necessary and were paid accordingly for working. With
the new work schedule, the employees are now given a one-hour lunch break without any interruption from their
employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use this hour not
only for eating but also for their rest and comfort which are conducive to more efficiency and better performance in
their work. Since the employees are no longer required to work during this one-hour lunch break, there is no more
need for them to be compensated for this period. We agree with the Labor Arbiter that the new work schedule fully
complies with the daily work period of eight (8) hours without violating the Labor Code. 7 Besides, the new
schedule applies to all employees in the factory similarly situated whether they are union members or not. 8
Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby case 9 with
the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that case
involved the matter of granting lunch breaks to certain employees while depriving the other employees of such
breaks. This Court affirmed in that case the NLRC's finding that such act of management was discriminatory and
constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees but only the issue of
whether the change of work schedule, which management deems necessary to increase production, constitutes
unfair labor practice. As shown by the records, the change effected by management with regard to working time is
made to apply to all factory employees engaged in the same line of work whether or not they are members of
private respondent union. Hence, it cannot be said that the new scheme adopted by management prejudices the
right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that
goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. 10 Thus, management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time,
place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. 11 Further,
management retains the prerogative, whenever exigencies of the service so require, to change the working hours
of its employees. So long as such prerogative is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold such exercise. 12
While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every dispute will be automatically decided in favor of labor. Management also has rights
which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although this Court has
inclined more often than not toward the worker and has upheld his cause in his conflicts with the employer, such
favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated 29
November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing the
complaint against petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.

necesario el que se hagan faenas de noche para el suministro de gasolina y lubricantes, y para otros menesteres.
La compania petrolera se ha excepcionado contra dicha decision de ahi el presente recurso de certiorari para que
la revoquemos.
La compania recurrente alega y arguye que no solo no existe ninguna disposicion legal que faculte a la Corte de
Relaciones Industriales para ordenar el pago de compensacion adicional a obreros que trabajan de noche, sino
que, por el contrario, la ley del Commonwealth No. 444 exime al patrono de semejante obligacion toda vez que en
dicha ley se proveen los casos en que es compulsorio el pago de "overtime" (compensacion adicional), y entre
tales casos no figura el trabajo de noche.
Por su parte, la union obrera recurrida sostiene que la facultad que se discute forma parte de los poderes amplios
y efectivos que la ley del Commonwealth No. 103 la carta organica del Tribunal de Relaciones Industriales
otorga a dicho tribunal; y que la ley No. 444 del Commonwealth que se invoca no tiene ninguna aplication al
presente caso, pues la misma es de alcance forzosamente limitado, refiriendose particular y exclusivamente a la
jornada maxima de trabajo contidiano permitida en los establecimientos industriales la jornada de 8 horas.
Nuestra conclusion es que la union obrera recurrida tiene la razon de su parte. Para una clara y cabal elucidacion
de los puntos discutidos, estmamos conveniente, aun a riesgo de alargar esta ponencia, transcribir
lasdisposiciones legales pertinentes que son los articulos 1, 4 y 13 de la ley del Commonwealth No. 103. Helas
aqui:
SECTION 1. The Judge: his appointment, qualifications, compensation, tenure. There is hereby created a
Court of Industrial Relations, which shall have jurisdiction over the entire Philippines, to consider, investigate,
decide, and settle any question, matter, controversy or dispute arising between, and/or affecting, employers and
employees or laborers, and landlords and tenants or farm-laborers, and regulate the relation between them,
subject to, and in accordance with, the provisions of this Act. The Court shall keep a record of all its proceedings
and shall be presided over by a Judge to be appointed by the President of the Philippines with the consent of the
Commission on Appointments of the National Assembly. The Judge of the Court shall hold office during good
behavior until he reaches the age of seventy years, or becomes incapacitated to discharge the duties of his office.
His qualifications shall be the same as those provided in the Constitution for members of the Supreme Court and
he shall receive an annual compensation of ten thousand pesos and shall be entitled to traveling expenses and
per diems when performing official duties outside of the City of Manila. The Department of Justice shall have
executive supervision over the Court.

G.R. No. L-1309

July 26, 1948
THE SHELL COMPANY OF PHILIPPINE ISLANDS, LIMITED, recurrente,
vs.
NATIONAL LABOR UNION, recurrida.
Sres. Ross, Selph, Carrascoso y Janda en representacion de la recurrente.Sres. Paguia y Villanueva en
representacion de la recurrida.
BRIONES, J.:
Actuando sobre una peticion de la entidad obrera llamada "National Labor Union," la Corte de Relaciones
Industriales ha dictado una decision en la que, entre otras cosas, se obliga a la firma petrolera "The Shell
Company of Philippine Islands, Limited" a pagar a sus obreros que trabajan de noche (desde que se pone el sol
hasta que se levanta al dia siguiente) una compensacion adicional de 50% sobre sus salarios regulares si
trabajasen de dia. Parece que la comania tiene necesidad del servicio nocturno de un determinado numero de
obreros, pues los aviones procedentes del extranjero suelen aterrizar y despegarse de noche, siendo por esto

SEC. 4. Strikes and lockouts. The Court shall take cognizance for purpose of prevention, arbitration, decision
and settlement, of any industrial or agricultural dispute causing or likely to cause a strike or lockout, arising form
differences as regards wages, shares or compensation, hours of labor or conditions of tenancy or employment,
between employers and employees or laborers and between landlords and tenants or farm-laborers, provided that
the number of employees, laborers or tenants or farm-laborers involved exceeds thirty, and such industrial or
agricultural dispute is submitted to the Court by the Secretary of Labor, or by any or both of the parties to the
controversy and certified by the Secretary of Labor as existing and proper to be dealt with by the Court for the
sake of public interest. In all such cases, the Secretary of Labor or the party or parties submitting the disputes,
shall clearly and specifically state in writing the questions to be decided. Upon the submission of such a
controversy or question by the Secretary of Labor, his intervention therein as authorized by law, shall cease.
The Court shall, before hearing the dispute and in the course of such hearing, endeavor to reconcile the parties
and induce them to settle the dispute by amicable agreement. If any agreement as to the whole or any part of the
dispute is arrived at by the parties, a memorandum of its terms shall be made in writing, signed and acknowledged
by the parties thereto before the Judge of the Court or any official acting in his behalf and authorized to administer
oaths or acknowledgments, or, before a notary public. The memorandum shall be filed in the office of the Clerk of
the Court, and, unless otherwise ordered by the Court, shall, as between the parties to the agreement, have the
same effect as, and be deemed to be, a decision or award.
SEC. 13. Character of the award. In making an award, order or decision, under the provisions of section four of
this Act, the Court shall not be restricted to the specific relief claimed or demands made by the parties to the
industrial or agricultural dispute, but may include in the award, order or decision any matter or determination which
my be deemed necessary or expedient for the purpose of setting the dispute or of preventing further industrial or
agricultural disputes.

Resulta evidente de las disposiciones transcritas lo siguiente: (a) que cuando surge una disputa entre el principal
y el empleado u obrero, vgr. sobre cuestion de salarios, la Corte de Relaciones Industriales tiene jurisdiccion en
todo el territorio de Filipinas para considerar, investigar y resolver dicha disputa, fijando los salarios que estime
justos y razonables; (b) que para los efectos de prevencion, arbitraje, decision y arreglo, el mismo Tribunal de
Relaciones Industriales tien igualmente jurisdiccion para conocer de cualquier disputa industrial o agricola
resultante de cualesquier diferencias respecto de los salarios, participaciones o compensaciones, horas de
trabajo, condiciones del empleo o de la aparceria entre los patronos y los empleados u obreros y entre los
propietarios y los terratenientes u obreros agricolas previo el cumplimiento de ciertos requisitos y condiciones,
cuando se viere que dicha disputa ocasiona o puede ocasionar una huelga; (c) que en el ejercicio de sus
facultades arriba especificadas, el Tribunal de Relaciones Industriales no queda limitado, al decidir la disputa, a
conceder el remedio o remedios solicitados por las partes en la controversia, sino que puede incluir en la orden or
decision cualquier materia o determinacion para el proposito de arreglar la disputa o de prevenir ulteriores
controversias industriales o agricolas.
En el caso nos ocupa existe indudablemente una dispunta industrial. Mientras la empresa, la compania Shell, no
esta dispuesta a pagar a sus obreros de noche mayores salarios que los obreros de ida, la "NationalLabor Union",
a la cual estan afiliados los trabajadoresde la Shell, reclama otro tipo de salarios para el servicio nocturno un
50% mas. En esto consiste la disputa, el litigio industrial. Ahora bien: que ha hecho la Corte de Relaciones
Industriales, despues de sometido el conflicto a su jurisdiccion? Pues precisamente lo que manda la citada ley
No. 103 del Commonwealth, carta organica de su creacion y funcionamiento, a saber: considerar, investigar y
enjuiciar la disputa, resolviedola despues en el sentido en que la ha resuelto, es decir, remunerando el trabajo de
noche con un 50% mas de los salarios de dia. Y esto es perfectamente legal tanto dentro del alcance del articulo
1 de la referida ley No. 103 que faculta a la Corte de Relaciones Industriales para decidir cualquier disputa sobre
salarios y compensaciones en la forma que estime razonable y conveniente, como dentro del marco del articulo 4
de la misma ley que autoriza a dicho tribunal para enjuiciar y decidir cualquier pleito o controversia industrial o
agricola determine el estallido de una huelga o tienda a causarla. Mas todavia: lo hecho por el Trbunal de
Relaciones Industriales en el presente caso es asimismo legal dentro del marco del articulo 13 de la misma ley
No. 103, articulo que, como queda visto, no solo faculta a dicho tribunal a conceder el remedio que recabanlas
partes, sino inclusive a ir mas alla, esto es, a otorgar remedios no expresamente solicitados, siempre que los
mismos se encamienen a resolver de una vez la disputa o a prevenir el estallido de ulteriores disputas o huelgas.
Es evidente que con estos amplios poderes el Estadose ha propuesto equipar al Tribunal de Relaciones
Industriales hasta el maximum posible de utilidad y eficacia, haciendo del mismo no una simple agencia
academica, sino verdaderamente activa, dinamica y eficiente en una palabra, la maquinaria oficial por
excelencia en la formidable y espinosa tarea de resolver los conflictos industriales, yagricolas de cierta clase,
previniendo y evitando de esta manera esos paros y huelgas que tanto afligen y danan no solo a las empresas y
a los obreros, sino, en general, a toda la comunidad. En su opinion concurrente dictada en el caso autoritativo de
Ang Tibay contra Tribunal de Relaciones Industriales 1 (R.G. No. 46496), el Magistado Laurel ha expresado muy
acertadamente la idea fundamental que subraya la creacion de dicho tribunal, con el siguiente pronunciamiento:
In Commonwealth Act No. 103, and by it, our government no longer performs the role of mere mediator or
intervenor but that of supreme arbiter. (Las cursivas son nuestras.).
La recurrente arguye, sin embargo, que si bien es verdad que en caso de disputa el Tribunal de relaciiones
Industriales tiene, en virtud de su ley organica, el poder de fijar los salarios, tal poder no es absoluto, sino que
esta sujeto a ciertas restricciones y cortapizas, provistas en la ley comunmente conocida por ley sobre la jornada
de ocho horas, la ley del Commonwealth No. 444, cuyos articulos pertinentes se transacriben integramente a
continuacion:
SECTION 1. The legal working day for any person employed by another shall be of not more than eight hours
daily. When the work is not continuous, the time during which the laborer is not working and can leave his working
place and can rest completely shall not be counted.
SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending emergencies caused by
serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity in order to prevent loss
to life and property or imminent danger to public safety; or in case urgent work to be performed on the machines,
equipment, or installations in order to avoid a serious loss which the employer would otherwise suffer, or some

other just cause of a similar nature; but in all such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their regular wages or salary, plus at least
twenty-five per centum additional.
In case of national emergency the government is empowered to establish rules and regulations for the operation
of the plants and factories and to determine the wages to be paid the laborers.
SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall compel an
employee or laborer to work during Sundays and legal holidays, unless he is paid an additional sum of at least
twenty-five per centum of his regular remuneration: Provided however, That this prohibition shall not apply to
public utilities performing some public service such as supplying gas, electricity, power, water, or providing means
of transportation or communication.
Como quiera argumentanlos abogados de la recurrente que en estos articulos se especifican los casos en
que se autoriza el pago de compensacion extra o adicional y son solo, a saber: (a) en caso de "overtime" o
trabajo en exceso de las horas regulares por razones imperiosasde urgencia con motivo de algun desastre o
accidente, o para evitar perdidas o repararlas; (b) en caso de trabajo por los domingos y fiestas; (c) en caso de
emergencia, y nada hay que se refiera al trabajo de noche; luego la orden de que se trata es ilegal, pues no esta
autorizada por la ley. "In the absence recalcan los abogados de la recurrente legislation authorizing the
payment of extra compensation for work done at night, the Court of Industrial Relations ha no power or authority to
order the petitioner company to pay extra compensation for work done by its laborers at night. Expressio unius est
exclusio alterius. Where, as inthe case at bar, statute expressly specifies the cases where payment of extra
compensation may be demanded, extra compensation may be allowed in those cases only, and in no others. The
provisions of the Commonwealth Act No. 444 cannot be enlarged by implication or otherwise. Expressum facit
cessare tacitum.
La argumentacion es erronea. La Ley No. 444 no es aplicable al presente caso, siendo evidente que la misma
tiene un objeto especifico, a saber: (a) fijar en 8 horas la jornada maxima de trabajo; (b) senalar ciertos casos
excepcionales en que se puede autorizar el trabajo fuera de dicha jornada; (c) proveer un sobresueldo, que no
debe ser menor de 25% del salario regular, para el "overtime" o trabajo en exceso de las 8 horas.
En el caso de Manila Electric, solicitante-apelante, contra The Public Utities Employees' Association, 2 apelada, L1206 (45 Off. Gaz., 1760), esta Corte ha declarado que la facultad conferida por el articulo 1 de la ley del
Commonwealth No. 103 al Tribunal de relaciones Industriales para enjuciar y decidir pleitos y controversias
industriales entre el capital y el trabajo, que incluye la de fijar salarios y compnsaciones de empleados y obreros,
ha quedado restringida por el articulo 4 de la ley Commonwealth No. 444, que al mismo tiempo que limita a un
25% del salario o compensacion regular del obrero el minimum de la compensacion adicional que el tribunal
puede conceder por trabajos en los Domingos y fiestas oficiales, exime del pago de dicha compensacion
adicional a las entidades de utilidad publica que prestan algun servicio publico, como las que suministran gas,
electricidad, fuerza mortriz, agua, o proveen medios de transporte o communicacion. Tal restriccion viene a ser
una excepcion de la facultad general del tribunal para fijar, en casos de disputa, los salarios y compensaciones
que deben pagar los patronos a los empleados y obreros; y como quiera que dicho articulo 4 se refiere solamente
a salario o compensacion por trabajos durante los dias de Domingo y fiestas oficiales, es obvio que no puede
referirse a salario o compensacion adicional por trabajos fuera de lajornada de ocho horas que generalmente se
realizan desde primeras horas de la manana a ultimas horas de la tarde, pues una cosa es trabajar en dias de
Domingo y fiestas oficiales, y otra cosa bien distinta es trabajar de noche of fuera de la jornada de ocho horas en
dias laborables. Aplicando la maxima legal "expressio unius est exclusio alterius," se puede sostener, sin temor de
equivocarse, que una ley que provee una excepcion especifica a sus disposiciones generales, como la
compensacion adicional por trabajos en dias de Domingo y fiestas oficiales, excluye cualquiera otra, como la
compensacion adicional por trabajos de noche en dias laborables."Another case in which this maxim may almost
invariably by followed is that of statute which makes certain specific exceptions to its general provisions. Here
wemay safely assume that all other exceptions were intended to be excluded." (Wabash R. Co.vs. United States,
178 Fed., 5, 101 C. C. A. 133; Cella Commision Co. vs. Bohlinger, 147 Fed., 419; 78 C. C. A. 467; Kunkalman vs.
Gibson, 171 Ind., 503; 84 N.E. 985; Hering vs. Clement, 133 App. Div., 293; 117 N.Y., Supp. 747.).
El trabajo denoche que la compania Shell exige de sus obreros no es talmente un "overtime", en el sentido en
que se emplea esta palabra en la Le No. 444, sino que es una jornada completa de trabajo, tambien de 8 horas:
solo que, en vez de realizarse de dia, se hace de noche. Dicho en otras palabras, el trabajo de noche de que aqui

se trata no es solamente unexceso, prolongacion u "overtime" del trabajo regular de dia, sino que es otro tipo de
trabajo, absolutamente independiente de la jornada diurna. Por eso hay dos turnos: el turno de obreros que
trabajan de dia; y el turno de los que trabajan de noche. Asi que no es extrano que el legislador no haya incluido
este tipo de trabajo entre los casos de "overtime" senalados en la referida ley No. 444.
La cuestion que, a nuestro juicio, se debe determinar es si entre las facultades generales de la Corte de
Relaciones Industriales que estan admitidas sin dipusta, esta la de considerar la jornada de noche como una
jornada completa de trabajo; la de estimarla como mas gravosa que la jornada de dia; y consiguientemente, la de
proveer y ordenar que se remunere con un 50% mas de los salarios regulares diurnos. Nuestra contestacion es
afirmativa: todo esto se halla comprendido entre los poderes generales de la Corte de Relaciones Industriales. Si
este tribunal tiene, en casos de disputa, el poder de fijar los salarios que estime justos y razonables para el
trabajo de dia, no hay razon por que no ha de tener el mismo poder con respecto a los salarios de noche; es tan
trabajo lo uno como lo otro. Y con respecto ala apreciacion de que el trabajo de noche es mas pesado y oneroso
que el de dia y, por tanto, merece mayor remuneracion, tampoco hay motivospara revocarla o alterarla. No hay
argumento posible contra el hecho universal de que el trabajo regular, normal y ordinario es el de dia, y que el
trabajo de noche es muy exceptional y justificado solo por ciertos motivos imperativamente inevitables. Por algo la
humanidad ha trabajadosiempre de dia.
Razones de higiene, de medicina, de moral, de cultura, de sociologia, establecen de consuno que el trabajo de
nocho tiene muchos inconvenientes, y cuando no hay mas remedio que hacerlo es solo justo que se remunero
mejor que de ordinario para resarcir hasa cierto punto al obrero de tales inconvenientes. Es indudable que el
trabajo de noche no solo a la larga afecta a la salud del trabajador, sino que le priva a este de ciertas cosas que
hacen relativamente agradable la vida, como, vgr., un reposo completo e ininterrumpido y ciertos ratos de solaz,
ocio o expansion espiritual y cultural que podria tener al terminar el trabajo por la tarde y durante las primeras
horas de la noche. Se dice que el obrero puede descansar de dia despues de haber trabajado toda la noche; pero
puede acaso el reposo de dia dar al cuerpo aquel tonico y aquel efecto reparador completo que solo puede
proporcionar el reposo natural de noche? Se dice tambien que algunos prefieren trabajar de noche bajo nuestro
clima abrasador, evitando asi el calor del dia. Mucho tememos, sin embargo, que esto sea mejor hablado que
praticado. Creemos que desde tiempo inmemorial la regla universal es que el hombre trabja de noche mas por
necesidad irremediable que por placentera conveniencia.
A la opinion vulgar, universal, hay que sumar la opinionpericial, el criterio especialista. La opinion de los
tratadistas y expertos milita decididamente en favor de la tesis de que el trabajo de noche es mas duro y oneroso
que el trabajo de dia, considerandose por esto con marcada repugnancia y compeliendo consiguientemente a las
gerencias capitalisticas a establecer una escala mas alta de salarios como incentivo a los obreros para aceptarlo.
Se podrian citar virias autoridades, pero para no extender demasiado esta ponencia optamos por transcriber
solamente algunas, a saber:
. . . Then, it must be remembered that it is distinctly unphysiological to turn the night into day and deprive the body
of the beneficial effects of sunshine. The human organism revolts against this procedure. Added to artificial lighting
are reversed and unnatural times of eating, resting, and sleeping. Much of the inferiority of nightwork can
doubtless be traced to the failure of the workers to secure proper rest and sleep, by day. Because of inability or the
lack of opportunity to sleep, nightworkers often spend their days in performing domestic duties, joining the family
in the midday meal, 'tinkering about the place', watching the baseball game, attending the theater or taking a ride
in the car. It is not strange that nightworkers tend to be less efficient than dayworkers and lose more time. . . (The
Management of Labor Relations, by Watkins & Dodd, page 524.).
Nightwork. Nightwork has gained a measure of prominence in the modern industrial system in connection with
continuous industries, that is, industries in which the nature of the processes makes it necessary to keep
machinery and equipment in constant operation. Even in continuous industries the tendency is definitely in the
direction of FOUR shifts of 6 hours each, with provision for an automatic change of shift for all workers at stated
intervals. Some discussion has taken place with regard to the lengths of the period any workers should be allowed
to remain on the night shift. A weekly change of shifts is common, specially where three or four shifts are in
operation; in other cases the change is made fortnightly or monthly; in still other instances, no alternation is
provided for, the workers remaining on day or nightwork permanently, except where temporary changes are
made for individual convenience.
There is sharp difference of opinion concerning the relative merits of these systems. Advocates of the weekly

change of shifts contend that the strain of nightwork and the difficulty of getting adequate sleep during the day
make it unwise for workers to remain on the"graveyard" shift for more than a week at a time. Opponents urge that
repeated changes make it more difficult to settle down to either kind of shift and that after the first week nightwork
becomes less trying while the ability to sleep by day increases. Workers themselves react in various ways to the
different systems. This much, however, is certain: Few persons react favorably to nightwork, whether the shift be
continuous or alternating. Outside of continuous industries, nightwork can scarcely be justified, and, even in these,
it presents serious disadvantages which must be recognized in planing for industrial efficiency, stabilization of the
working force, the promotion of industrial good-will, and the conservation of the health and vitality of the workers.
Nightwork cannot be regarded as desirable, either from the point of view of the employer or of the wage earner. It
is uneconomical unless overhead costs are unusually heavy. Frequently the scale of wages is higher as an
inducement to employees to accept employment on the night shift, and the rate of production is generally lower.
(Management of Labor Relations, by Watkins & Dodd, pp. 522-524; emphasis ours.)
. . . The lack of sunlight tends to produce anemia and tuberculosis and to predispose to other ills. Nightwork brings
increased liability to eyestrain and accident. Serious moral dangers also are likely to result from the necessity of
traveling the streets alone at night, and from the interference with normal home life. From an economic point of
view, moreover, the investigations showed that nightwork was unprofitable, being inferior to day work both in
quality and in quantity. Wherever it had been abolished, in the long run the efficiency both of the management and
of the workers was raised. Furthermore, it was found that nightwork laws are a valuable aid in enforcing acts fixing
the maximum period of employment. (Principles of Labor Legislation, by Commons and Andrews, 4th Revised
Edition, p. 142.)
Special regulation of nightwork for adult men is a comparatively recent development. Some European countries
have adopted laws placing special limitations on hours of nightwork for men, and others prohibit such work except
in continuous processes. (Principles of Labor legislation, 4th Revised Edition by Common & Andrews, p. 147.)
Nightwork has almost invariably been looked upon with disfavor by students of the problem because of the
excessive strain involved, especially for women and young persons, the large amount of lost time consequent
upon exhaustion of the workers, the additional strain and responsibility upon the executive staff, the tendency of
excessively fatigued workers to "keep going" on artificial stimulants, the general curtailment of time for rest,
leisure, and cultural improvement, and the fact that night workers, although precluded to an extent from the
activities of day life, do attempt to enter into these activities, with resultant impairment of physical well-being. It is
not contended, of course, that nightwork could be abolished in the continuous-process industries, but it is possible
to put such industries upon a three- or four-shifts basis, and to prohibit nightwork for women and children. (Labor's
Progress and Problems, Vol. I, p. 464, by Professors Millis and Montgomery.)
Nightwork. Civilized peoples are beginning to recognize the fact that except in cases of necessity or in periods
of great emergency, nightwork is socially undesirable. Under our modern industrial system, however, nightwork
has greatly aided the production of commodities, and has offered a significant method of cutting down the everincreasing overhead costs of industry. This result has led employers to believe that such work is necessary and
profitable. Here again one meets a conflict of economic and social interests. Under these circumstances it is
necessary to discover whether nightwork has deleterious effects upon the health of laborers and tends to reduce
the ultimate supply of efficient labor. If it can proved that nightwork affects adversely both the quality and quantity
of productive labor, its discontinuance will undoubtedly be sanctioned by employers. From a social point of view,
even a relatively high degree of efficiency in night operations must be forfeited if it is purchased with rapid
exhaustion of the health and energy of the workers. From an economic point of view, nightwork may be necessary
if the employer is to meet the demand for his product, or if he is to maintain his market in the face of increasing
competition or mounting variable production costs.
Industrial experience has shown that the possession of extra-ordinary physical strength and self-control facilitates
the reversal of the ordinary routine of day work and night rest, with the little or no unfavorable effect on health and
efficiency. Unusual vitality and self-control, however, are not common possessions. It has been found that the
most serious obstacle to a reversal of the routine is the lack of self-discipline. Many night workers enter into the
numerous activities of day life that preclude sleep, and continue to attempt to do their work at night. Evidence
gathered by the British Health of Munition Workers' Committee places permanent night workers, whether judged
on the basis of output or loss of time, in a very unfavorable positions as compared with day workers.

Systems of nightwork differ. There is the continuous system, in which employees labor by night and do not attend
the establishment at all by day, and the discontinuous system, in which the workers change to the day turn at
regular intervals, usually every other week. There are, of course, minor variations in these systems, depending
upon the nature of the industry and the wishes of management. Such bodies as the British Health Munition
Workers' Committee have given us valuable conclusions concerning the effect of nightwork. Continuous nightwork
is definitely less productive than the discontinuous system. The output of the continuous day shift does not make
up for this loss in production.
There is, moreover, a marked difference between the rates of output of night and day shifts on the discontinuous
plan. In each case investigated the inferiority of night labor was definitely established. This inferiority is evidently
the result of the night worker's failure to secure proper amounts of sleep and rest during the day. The system of
continuous shifts, especially for women, is regarded by all investigators as undesirable. Women on continuous
nightwork are likely to perform domestic duties, and this added strain undoubtedly accounts for the poorer results
of their industrial activities. The tendency to devote to amusement and other things the time that should be spent
in rest and sleep is certainly as common among men as among women workers and accounts largely for the loss
of efficiency and time on the part of both sexes in nightwork.
The case against nightwork, then, may be said to rest upon several grounds. In the first place, there are the
remotely injurious effects of permanent nightwork manifested in the later years of the worker's life. Of more
immediate importance to the average worker is the disarrangement of his social life, including the recreational
activities of his leisure hours and the ordinary associations of normal family relations. From an economic point of
view, nightwork is to be discouraged because of its adverse effect upon efficiency and output. A moral argument
against nightwork in the case of women is that the night shift forces the workers to go to and from the factory in
darkness. Recent experiences of industrial nations have added much to the evidence against the continuation of
nightwork, except in extraordinary circumstances and unavoidable emergencies. The immediate prohibition of
nightwork for all laborers is hardly practicable; its discontinuance in the case of women employees is
unquestionably desirable. 'The night was made for rest and sleep and not for work' is a common saying among
wage-earning people, and many of them dream of an industrial order in which there will be no night shift. (Labor
Problems, 3rd Edition, pp. 325-328, by Watkins & Dodd.).
En meritos de lo expuesto, se deniega el recurso de certiorari interpuesto y se confirma la sentencia del Tribunal
De Reclaciones Industriales, con costas a cargo de a recurrente. Asi se ordena.

G.R. No. L-12075

May 29, 1959
NATIONAL RICE AND CORN CORPORATION (NARIC), petitioner,
vs.
NARIC WORKERS UNION, ET AL., respondents.
Zosimo Q. Pizarro for for petitioner.Vicente T. Ocampo for respondent NARIC Worker's Union.Edilberto J. Pangan
fo respondent CIR.
BAUTISTA ANGELO, J.:
In Case No. 746-V of the Court of Industrial Relations, entitled NARIC Workers Union vs. National Rice and Corn
Corporation, the industrial court promulgated a decision dated February 15, 1956 directing that the corporation
pay to its workers 25 per cent additional compensation for night work rendered by them.
On May 21, 1956, upon motion of the union, the industrial court issued an order directing its chief examiner, or any
of his assistants, to compute the additional compensation for night work granted in the decision covering the

period from October 3, 1952 to February 16, 1953. The chief examiner acted as directed and submitted his report
to the court on August 7, 1956. The report shows that there are 163 workers and employees of the corporation
who have rendered night work from October 3, 1952, to February 16, 1953 and the 25 per cent additional
compensation of said workers and employees computed on the basis of their respective monthly salaries
amounted to P5,221.84.
On September 24, 1956, the union filed with the court a petition for execution of the decision praying that the
corporation be ordered to deposit with the court the said sum of P5,221.84. On September 27, 1956, the
corporation filed its opposition contending that said motion is premature because the report of the examiner has
not yet been passed upon and approved by the court and therefore is not yet final.
The motion, as well as the opposition, were set for hearing, during which the chief examiner was called upon to
explain his report. He stated that in making his report he considered any all work performed between 6:00 o'clock
in the afternoon and 6:00 o'clock in the morning as "night work" and accordingly has awarded each employee or
worker an additional compensation of 25 per cent for "night work". He further stated that if a particular employee
worked from 8:00 o'clock in the morning to 5:00 o'clock in the afternoon and then rendered overtime service from
5:00 o'clock in the afternoon of the same day to 7:00 o'clock in the evening of the same day, he considered the
work from 5:00 to 6:00 p.m. as overtime work and entitled to 25 per cent additional compensation as overtime
work, and the same work from 6:00 to 7:00 p.m. as both overtime work and night work and therefore entitled to 25
per cent additional compensation as overtime work and another 25 per cent additional compensation as night
work.
Notwithstanding the opposition of the corporation to the report of the chief examiner as explained by him, the
industrial court issued an order on December 28, 1956 approving the same and ordering the corporation to
deposit with said court the amount of P5,221.84 within five days from receipt of the order. On January 3, 1957, the
corporation filed a motion for reconsideration praying that a recomputation of the additional compensation due the
employees be ordered, but the Court of Industrial Relations en banc issued a resolution on February 13, 1957
stating that it finds no sufficient justification for altering or modifying its previous order, Hence the present petition
for review.
The main issue raised by the corporation is: "Should the employee performing his regular eight hours work during
the daytime from 8:00 o'clock in the morning to 12:00 o'clock at noon and from 1:00 o'clock to 5:00 o'clock in the
afternoon . . . be paid for his services from 5:00 o'clock to 9:00 in the afternoon as "overtime work" and at the
same time be paid from 6:00 o'clock to 9:00 o'clock in the evening as night work?"
The respondent court, in issuing its order of December 28, 1956, as well as its resolution en banc dated February
13, 1957, has in effect held that "night work" is any and all work rendered between 6:00 o'clock in the afternoon
and 6:00 o'clock in the morning, and consequently, if a certain employee performs his regular eight hours up to
5:00 o'clock in the afternoon and renders overtime from 5:00 p.m. to 9:00 p.m. of the same day, the said employee
is entitled to an additional compensation for overtime services from 5:00 p.m. to 9:00 p.m. and at the same time to
additional compensation for "night work" from 6:00 p.m. to 9:00 p.m. for the very same work. In other words,
respondent court upheld the manner of computation made by its chief examiner in implementing its decision
rendered on February 15, 1956. This interpretation of the term "night work" is, according to the corporation,
erroneous for it runs counter to the definition given to said term by this Court in Shell Company of the Philippines
vs. National Labor Union, 81 Phil., 315; 46 Off. Gaz., 97.
Thus, in said case, the following comment was made: "The night work which the Shell Company demands of its
laborers is not merely an overtime work in the sense in which this word is issued in Act No. 444, but it is in reality a
complete working day also of eight hours, only that, instead of its being done at daytime, it is performed at night. In
other words, the night work referred to here is not an excess, extension or overtime of the regular work during the
day time, but it is rather another kind of work absolutely independent of the work being done during the day. For
this reason, there are two shifts: the shift of laborers who work during the day and the shift of those who work at
night." (Translated into English)
While it is true that this Court made the above comment in the aforementioned case, it does not intend to convey
the idea that work done at night cannot also be an overtime work. The comment only served to emphasize that the
demand which the Shell company made upon its laborers is not merely an overtime work but night work and so
there was need to differentiate night work from daytime work. In fact, the company contended that there was no

law that required the payment of additional compensation for night work unlike an overtime work which is covered
by Commonwealth Act No. 444 (Eight Hour Labor Law). And this Court in that case said that while there was no
law actually requiring payment of additional compensation for night work, the industrial court has the power to
determine the wages that night workers should receive under Commonwealth Act No. 103, and so it justified the
additional compensation given to night workers by the industrial court in the Shell case for "hygienic, medical,
moral, cultural and sociological reasons." That case therefore cannot be invoked as an authority for concluding
that one who does night work cannot be paid additional compensation for the same work as overtime. One is paid
for his work done during the night and the other is paid because it is excess of the regular eight-hour work may be
legally required to do. One is done for reasons of health and the other because of an express mandate of the law
(Commonwealth Act No. 444). We find therefore correct the computation made by the chief examiner as affirmed
by the industrial court.
The logic of this conclusion may be better seen by an example. Let us suppose that the workers of an industrial
company work in three shifts: one from 8:00 o'clock a.m. to 4:00 o'clock p.m.; another from 4:00 o'clock p.m. to
12:00 o'clock p.m.; and still another from 12:00 o'clock p.m. to 8:00 o'clock a.m. Supposing that night work begins
from 6:00 o'clock p.m. and ends at 6:00 o'clock a.m. (Article 13, New Civil Code.) Under the law and
jurisprudence, the first shift workers will have to be paid a compensation as day workers; the second shift workers
will have to be partly as day workers and partly as night workers; and the third workers will have to be partly paid
as night workers and partly as day workers.
Supposing again that the second shift workers, for some justifiable reasons, are required to extend their work from
12:00 o'clock p.m. to 2:00 o'clock a.m. Under the law, they are entitled to additional compensation for overtime
work on the basis of their wages as night workers. If the first shift workers were required to extend their work up to
8:00 o'clock p.m., is it not fair and logical that for the two hours they work at night (6:00 to 8:00) they also be paid
an overtime compensation on the basis of wages paid for night workers? This is the only logical conclusion based
on our ruling in the Shell case which requires payment of additional compensation for night work. In other words,
work done at night should be paid more than work done by the chief examiner. Respondent court is there-workers
regular hour of duty, he should also be paid additional compensation for overtime work. This is what was done by
the chief examiner. Respondent court is therefore justified in affirming his report.
Wherefore, the order and resolution appealed from are affirmed, with costs against petitioner.

G.R. No. L-30452 September 30, 1982

MERCURY DRUG CO., INC., petitioner,
vs.
NARDO DAYAO, ET AL., respondents,
Caparas & Ilagan for petitioner.
Gerardo P. Cabo Chan and Elias Banzali for respondents.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the decision of the Court of Industrial Relations dated March 30, 1968 in
Case No. 1926-V and the Resolution of the Court en banc dated July 6, 1968 denying two separate motions for
reconsideration filed by petitioners and respondents.
The factual background of Case No. 1926-V is summarized by the respondent Court of Industrial Relations as
follows:
This is a verified petition dated March 17, 1964 which was subsequently amended on July 31, 1964 filed by Nardo

Dayao and 70 others against Mercury Drug Co., Inc., and/or Mariano Que, President & General Manager, and
Mercury Drug Co., Inc., Employees Association praying, with respect to respondent corporation and its president
and general manager: 1) payment of their unpaid back wages for work done on Sundays and legal holidays plus
25c/c additional compensation from date of their employment up to June 30, 1962; 2) payment of extra
compensation on work done at night; 3) reinstatement of Januario Referente and Oscar Echalar to their former
positions with back salaries; and, as against the respondent union, for its disestablishment and the refund of all
monies it had collected from petitioners.
In separate motions, respondent management and respondent union move to dismiss, the first on the ground that:
I. The petition states no cause of action.
II. This Court has no jurisdiction over the subject of the claims of petitioners Januario Referente and Oscar
Echalar.
III. There is another action pending between the same parties, namely, Mercury Drug Co., Inc., and/or Mariano
Que and Nardo Dayao.
while on the other hand, the second alleges that this Court has no jurisdiction over the acts complained of against
the respondent union.
For reasons stated in the Order dated March 24, 1965, two Court resolved the motions to dismiss, as follows:
1. Ground No. 1 of management's motion to dismiss was denied for lack of merit.
2. Its second ground was found meritorious and, accordingly Januario Referente and Oscar Echalar were dropped
as party petitioners in this case.
3. The third ground was denied, holding that there still exists the employer- employee relationship between Nardo
Dayao and the management.
4. With respect to the fourth ground, the Court held that on the basis of section 7-A of C.A. No. 444, as amended
by R.A. No. 1993, 'it can be safely said that,
counting backward the three (3) year prescriptive period from the date of the filing of the instant petition - March
20, 1964 - all-of petitioners' claims have not yet prescribed.'
5. In so far as respondent union's motion is concerned, the Court held that 'petitioners' cause of action against the
respondent Association should be dismissed without prejudice to the refiling of the same as an unfair labor
practice case.'
Only the respondent management moved to reconsider the Order of March 24, 1965 but the same was denied by
the Court en banc in a resolution dated August 26, 1965. Respondent submitted an answer to the amended
petition which was subsequently amended on January 6, 1966, containing some admissions and some denials of
the material averments of the amended petition. By way of affirmative and special defenses,, respondents alleged
that petitioners have no cause of action against Mariano Que because their employer respondent Mercury Drug
Company, Inc., an existing corporation which has a separate and distinct personality from its incorporators
stockholders and/or officer, that the company being a service enterprise is excluded from the coverage of the Eight
Hour Labor Law, as amended; that no court has the power to set wages, rates of pay, hours of employment, or
other conditions of employment to the extent of disregarding an agreement thereon between the respondent
company and the petitioners, and of fixing night differential wages; that the petitioners were fully paid for services
rendered under the terms and conditions of the individual contracts of employment; that the petition having been
verified by only three of the petitioners without showing that the others authorized the inclusion of their names as
petitioners does not confer jurisdiction to this Court; that there is no employer-employee relationship between
management and petitioner Nardo Dayao and that his claim has been released and/or barred by another action
and that petitioners' claims accuring before March 20, 1961 have prescribed." (Annex "P", pp. 110-112, rollo).
After hearing on the merits, the respondent court rendered its decision. The dispositive portion of the March 30,
1968 decision reads:
IN VIEW OF THE FOREGOING, the Court hereby resolves that:
1. The claim of the petitioners for payment of back wages correspoding to the first four hours work rendered on
every other Sunday and first four hours on legal holidays should be denied for lack of merit.
2. Respondent Mercury Drug Company, Inc.. is hereby ordered to pay the sixty- nine (69) petitioners:
(a) An additional sum equivalent to 25% of their respective basic or regular salaries for services rendered on
Sundays and legal holidays during the period from March 20. 1961 up to June 30, 1962; and
(b) Another additional sum or premium equivalent to 25% of their respective basic or regular salaries for nighttime
services rendered from March 20, 1961 up to June 30, 1962.

3. Petitioners' petition to convert them to monthly employees should be, as it is hereby, denied for lack of merit.
4. Respondent Mariano Que, being an officer and acted only as an agent in behalf of the respondent corporation,
should be absolved from the money claims of herein petitioners whose employer, according to the pleadings and
evidence, is the Mercury Drug Company,, Inc.
To expedite the computation of the money award, the Chief Court Examiner or his authorized representative is
hereby directed to proceed to the office of the respondent corporation at Bambang Street, Sta. Cruz, Manila, the
latter to make available to said employee its records, like time records, payrolls and other pertinent papers, and
compute the money claims awarded in this decision and, upon the completion thereof, to submit his report as soon
as possible for further disposition of the Court.
Not satisfied with the decision, the respondents filed a motion for its reconsideration. The motion for
reconsideration, was however, denied by the Court en banc in its Resolution dated July 6, 1968.
Petitioner Mercury Drug Company, Inc., assigned the following errors in this petition:
I
RESPONDENT CIR ERRED IN DECLARING THE CONTRACTS OF EMPLOYMENT, EXHIBITS "A" AND "B",
NULL AND VOID AS BEING CONTRARY TO PUBLIC POLICY AND IN SUSTAINING, ACCORDINGLY, PRIVATE
RESPONDENTS' CLAIMS FOR 25% SUNDAY AND LEGAL HOLIDAY PREMIUMS BECAUSE SUCH
DECLARATION AND AWARD ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, THUS INFRINGING
UPON THE CARDINAL RIGHTS OF THE PETITIONER; AND ALSO BECAUSE THE VALIDITY OF SAID t
CONTRACTS OF EMPLOYMENT HAS NOT BEEN RAISED.
II
RESPONDENT CIR ERRED IN SUSTAINING PRIVATE RESPONDENTS' CLAIMS FOR NIGHTTIME WORK
PREMIUMS NOT ONLY BECAUSE OF THE DECLARED POLICY ON COLLECTIVE BARGAINING FREEDOM
EX. PRESSED IN REPUBLIC ACT 875 AND THE EXPRESS PROHIBITION IN SECTION 7 OF SAID STATUTE,
BUT ALSO BECAUSE OF THE WAIVER OF SAID CLAIMS AND THE TOTAL ABSENCE OF EVIDENCE
THEREON.
III
RESPONDENT CIR ERRED IN MAKING AWARDS IN FAVOR OF THE PRIVATE RESPONDENTS WHO
NEITHER GAVE EVIDENCE NOR EVEN APPEARED TO SHOW THEIR INTEREST.
Three issues are discussed by the petitioner in its first assignment of error. The first issue refers to its allegation
that the respondent Court erred in declaring the contracts of employment null and void and contrary to law. This
allegation is premised upon the following finding of the respondent court:
But the Court finds merit in the claim for the payment of additional compensation for work done on Sundays and
holidays. While an employer may compel his employees to perform service on such days, the law nevertheless
imposes upon him the obligation to pay his employees at least 25% additional of their basic or regular salaries.
No person, firm or corporation, business establishment or place of center of labor shall compel an employee or
laborer to work during Sundays and legal holidays unless he is paid an additional sum of at least twenty-five per
centum of his regular remuneration: PROVIDED, HOWEVER, That this prohibition shall not apply to public utilities
performing some public service such as supplying gas, electricity, power, water, or providing means of
transportation or communication. (Section 4, C. A. No. 444) (Emphasis supplied)
Although a service enterprise, respondent company's employees are within the coverage of C. A. No. 444, as
amended known as the Eight Hour Labor Law, for they do not fall within the category or class of employees or
laborers excluded from its provisions. (Section 2, Ibid.)
The Court is not impressed by the argument that under the contracts of employment the petitioners are not entitled
to such claim for the reason that the same are contrary to law. Payment of extra or additional pay for services
rendered during Sundays and legal holidays is mandated by law. Even assuming that the petitioners had agreed
to work on Sundays and legal holidays without any further consideration than their monthly salaries, they are not
barred nevertheless from claiming what is due them, because such agreement is contrary to public policy and is
declared nun and void by law.
Any agreement or contract between employer and the laborer or employee contrary to the provisions of this Act

shall be null and void ab initio.

Under the cited statutory provision, the petitioners are justified to receive additional amount equivalent to 25% of
their respective basic or regular salaries for work done on Sundays and legal holidays for the period from March
20, 1961 to June 30, 1962. (Decision, pp. 119-120, rollo)
From a perusal of the foregoing statements of the respondent court, it can be seen readily that the petitionercompany based its arguments in its first assignment of error on the wrong premise. The contracts of employment
signed by the private respondents are on a standard form, an example of which is that of private respondent
Nardo Dayao quoted hereunder:
Mercury Drug Co., Inc. 1580 Bambang, Manila
October 30, 1959
Mr. Nardo Dayao
1015 Sta. Catalina
Rizal Ave., Exten.
Dear Mr. Dayao:
You are hereby appointed as Checker, in the Checking Department of MERCURY DRUG CO., INC., effective July
1, 1959 and you shall receive an annual compensation the amount of Two Thousand four hundred pesos only
(P2,400.00), that includes the additional compensation for work on Sundays and legal holidays.
Your firm being a Service Enterprise, you will be required to perform work every day in a year as follows:
8 Hours work on regular days and-all special Holidays that may be declared but with the 25% additional
compensation;
4 Hours work on every other Sundays of the month;
For any work performed in excess of the hours as above mentioned, you shall be paid 25 % additional
compensation per hour.
This appointment may be terminated without notice for cause and without cause upon thirty days written notice.
This supersedes your appointment of July 1, 1959.
Very truly yours,
MERCURY DRUG CO., INC.
(Sgd.) MARIANO QUE General Manager
ACCEPTED WITH FULL CONFORMITY:
(Sgd.) NARDO DAYAO
(EXH. "A" and "l ")
(Decision, pp. 114-115, rollo)
These contracts were not declared by the respondent court null and void in their entirety. The respondent court, on
the basis of the conflicting evidence presented by the parties, in effect: 1) rejected the theory of the petitioner
company that the 25% additional compensation claimed by the private respondents for the four-hour work they
rendered during Sundays and legal holidays provided in their contracts of employment were covered by the
private respondents' respective monthly salaries; 2) gave credence to private respondents', (Nardo Dayao,
Ernesto Talampas and Josias Federico) testimonies that the 25% additional compensation was not included in the
private respondents' respective monthly salaries and 3) ruled that any agreement in a contract of employment
which would exclude the 25% additional compensation for work done during Sundays and holidays is null and void
as mandated by law.
On the second issue, the petitioner-company reiterated its stand that under the,- respective contracts of
employment of the private respondents, the subject 25 % additional compensation had already been included in
the latter's respective monthly salaries. This contention is based on the testimony of its lone witness, Mr. Jacinto
Concepcion and pertinent exhibits. Thus:
Exhibit A shows that for the period of October 30, 1960, the annual compensation of private respondent Nardo
Dayao, including the additional compensation for the work he renders during the first four (4) hours on every other
Sunday and on the eight (8) Legal Holidays at the time was P2,400.00 or P200.00 per month. These amounts did
not represent basic salary only, but they represented the basic daily wage of Nardo Dayao considered to be in the

amount of P7.36 x 305 ordinary working days at the time or in the total amount of P2,144.80. So plus the amount
of P156.40 which is the equivalent of the Sunday and Legal Holiday rate at P9.20 basic rate of P7.36 plus 25%
thereof or P1.84) x 17, the latter figure representing 13 Sundays and 4 Legal Holidays of 8 hours each. ...

Inc. et al., v. Ferrer, et al (19 SCRA 130). The earliest cases cited by the petitioner-company, Naric v. Naric
Workers Union L-12075, - May 29, 1959 and Philippine Engineers' Syndicate u. Bautista, L-16440, February 29,
196.4, were discussed lengthily. Thus

xxx xxx xxx

That the required minimum 25% Sunday and Legal Holiday additional compensation was paid to and received by
the employees for the work they rendered on every other Sunday and on the eight Legal Holidays for the period
October, 1959 to June 30, 1962 is further corroborated by Exhibits 5, 6, 8, 9 and 9-A and the testimony of Mr.
Jacinto Concepcion thereon. (Brief for the Petitioner, pp. 24, 27).

xxx xxx xxx

2. On the claim for night differentials, no extended discussion is necessary. To be read as controlling here is
Philippine Engineers' Syndicate, Inc. vs. Hon. Jose S. Bautista, et al., L-16440, February 29, 1964, where this
Court, speaking thru Mr. Chief Justice Cesar Bengzon, declared

The aforesaid computations were not given credence by the respondent court. In fact the same computations
were not even mentioned in the court's decision which shows that the court found such computations incredible.
The computations, supposedly patterned after the WAS Interpretative Bulletin No. 2 of the Department Labor
demonstrated in Exhibits "6", "7", "8", "9", and "9-A", miserably failed to show the exact and correct annual salary
as stated in the respective contracts of employment of the respondent employees. The figures arrived at in each
case did not tally with the annual salaries on to the employees' contracts of employment, the difference varying
from P1.20 to as much as P14.40 always against the interest of the employees. The petitioner's defense consists
of mathematical computations made after the filing of the case in order to explain a clear attempt to make its
employees work without the extra compensation provided by law on Sundays and legal holidays.
In not giving weight to the evidence of the petitioner company, the respondent court sustained the private
respondents' evidence to the effect that their 25% additional compensation for work done on Sundays and Legal
Holidays were not included in their respective monthly salaries. The private respondents presented evidence
through the testimonies of Nardo Dayao, Ernesto Talampas, and Josias Federico who are themselves among the
employees who filed the case for unfair labor practice in the respondent court and are private respondents herein.
The petitioner- company's contention that the respondent court's conclusion on the issue of the 25% additional
compensation for work done on Sundays and legal holidays during the first four hours that the private respondents
had to work under their respective contracts of employment was not supported by substantial evidence is,
therefore, unfounded. Much less do We find any grave abuse of discretion on the part of the respondent court in
its interpretation of the employment contract's provision on salaries. In view of the controlling doctrine that a grave
abuse of discretion must be shown in order to warrant our disturbing the findings of the respondent court, the
reversal of the court's endings on this matter is unwarranted. (Sanchez vs. Court of Industrial Relations, 27 SCRA
490).
The last issue raised in the first assignment of error refers to a procedural matter. The petitioner-company
contends that ,-the question as to whether or not the contracts of employment were null and void was not put in
issue, hence, the respondent court pursuant to the Rules of Court should have refrained from ruling that such
contracts of employment were null and void. In this connection We restate our finding that the respondent court did
not declare the contracts of employment null and void in their entirety. Only the objectionable features violative of
law were nullified. But even granting that the Court of Industrial Relations declared the contracts of employment
wholly void, it could do so notwithstanding the procedural objection. In Sanchez u. Court of Industrial Relations,
supra, this Court speaking through then Justice, now Chief Justice Enrique M. Fernando, stated:
xxx xxx xxx
Moreover, petitioners appear to be oblivious of the statutory mandate that respondent Court in the hearing,
investigation and determination of any question or controversy and in the exercise of any of its duties or power is
to act 'according to justice and equity and substantial merits of the case, without regard to technicalities or legal
forms and shall not be bound by any technical rules of legal evidence' informing its mind 'in such manner as it may
deem just and equitable.' Again, this Court has invariably accorded the most hospitable scope to the breadth and
amplitude with which such provision is couched. So it has been from the earliest case decided in 1939 to a 1967
decision.
Two issues are raised in the second assignment of error by the petitioner-company. The first hinges on the
jurisdiction of the respondent court to award additional compensation for nighttime work. Petitioner wants Us to reexamine Our rulings on the question of nighttime work. It contends that the respondent court has no jurisdiction to
award additional compensation for nighttime work because of the declared policy on freedom of collective
bargaining expressed in Republic Act 875 and the express prohibition in Section 7 of the said statute. A reexamination of the decisions on nighttime pay differential was the focus of attention in Rheem of the Philippines,

Only one issue is raised: whether or not upon the enactment of Republic Act 875, the CIR lost its jurisdiction over
claims for additional compensation for regular night work. Petitioner says that this Act reduced the jurisdiction of
respondent court and limited it to specific cases which this Court has defined as: ... (1) when the labor dispute
affects an industry which is indispensable to the national interest and is so certified by the President to the
industrial court (Sec. 10, Republic Act 875); (2) when the controversy refers to minimum wage under the Minimum
Wage Law (Republic Act 602); (3) when it involves hours of employment under the Eight-Hour Labor Law
(Commonwealth Act 444) and (4) when it involves an unfair labor practice [Sec. 5(a), Republic Act 8751', [Paflu, et
al. vs. Tan, et al., 52 Off. Gaz, No. 13, 5836].
Petitioner insists that respondents' case falls in none of these categories because as held in two previous cases,
night work is not overtime but regular work; and that respondent court's authority to try the case cannot be implied
from its general jurisdiction and broad powers' under Commonwealth Act 103 because Republic Act 875 precisely
curbed such powers limiting them to certain specific litigations, beyond which it is not permitted to act.
We believe petitioner to be in error. Its position collides with our ruling in the Naric case [National Rice & Corn
Corp. (NARIC) vs. NARIC Workers' Union, et al., G.R. No. L-12075, May 29, 1959] where we held;
While it is true that this Court made the above comment in the aforementioned case, it does not intend to convey
the Idea that work done at night cannot also be an overtime work. The comment only served to emphasize that the
demand which the Shell Company made upon its laborers is not merely overtime work but night work and so there
was need to differentiate night work from daytime work. In fact, the company contended that there was no law that
required the payment of additional compensation for night work unlike an overtime work which is covered by
Commonwealth Act No. 444 (Eight Hour Labor Law). And this Court in that case said that while there was no law
actually requiring payment of additional compensation for night work, the industrial court has the power to
determine the wages that night workers should receive under Commonwealth Act No. 103, and so it justified the
additional compensation in the Shell case for 'hygienic, medical, moral, cultural and sociological reasons.
xxx xxx xxx
True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases thereafter, We held that the broad powers
conferred by Commonwealth Act 103 on the CIR may have been curtailed by Republic Act 875 which limited them
to the four categories therein expressed in line with the public policy of allowing settlement of industrial disputes
via the collective bargaining process; but We find no cogent reason for concluding that a suit of this nature for
extra compensation for night work falls outside the domain of the industrial court. Withal, the record does not show
that the employer-employee relation between the 64 respondents and the petitioner had ceased.
After the passage of Republic Act 875, this Court has not only upheld the industrial court's assumption of
jurisdiction over cases for salary differentials and overtime pay [Chua Workers Union (NLU) vs. City Automotive
Co., et al., G.R. No. L- 11655, April 29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or for
payment of additional compensation for work rendered on Sundays and holidays and for night work [Nassco vs.
Almin, et al., G.R. No. L9055, November 28, 1958; Detective & Protective Bureau, Inc. vs. Felipe Guevara, et al.,
G.R. No. L-8738, May 31, 1957] but has also supported such court's ruling that work performed at night should be
paid more than work done at daytime, and that if that work is done beyond the worker's regular hours of duty, he
should also be paid additional compensation for overtime work. [Naric vs. Naric Workers' Union. et al., G. R No. L12075, May 29, 1959, citing Shell Co. vs. National Labor Union, 81 Phil. 315]. Besides, to hold that this case for
extra compensation now falls beyond the powers of the industrial court to decide, would amount to a further
curtailment of the jurisdiction of said court to an extent which may defeat the purpose of the Magna Carta to the
prejudice of labor.' [Luis Recato Dy, et al v-9. CIR, G.R. No. L-17788, May 25,1962]"
The petitioner-company's arguments on the respondent court's alleged lack of jurisdiction over additional
compensation for work done at night by the respondents is without merit.

The other issue raised in the second assignment of error is premised on the petitioner-company's contention that
the respondent court's ruling on the additional compensation for nighttime work is not supported by substantial
evidence.
This contention is untenable. Pertinent portions of the respondent court's decision read:
xxx xxx xxx
There is no serious disagreement between the petitioners and respondent management on the facts recited
above. The variance in the evidence is only with respect to the money claims. Witnesses for petitioners declared
they worked on regular days and on every other Sunday and also during all holidays; that for services rendered on
Sundays and holidays they were not paid for the first four (4) hours and what they only received was the overtime
compensation corresponding to the number of hours after or in excess of the first four hours; and that such
payment is being indicated in the overtime pay for work done in excess of eight hours on regular working days. It
is also claimed that their nighttime services could well be seen on their respective daily time records. .. (Emphasis
supplied) (p.116, rollo)
The respondent court's ruling on additional compensation for work done at night is, therefore, not without
evidence. Moreover, the petitioner-company did not deny that the private respondents rendered nighttime work. In
fact, no additional evidence was necessary to prove that the private respondents were entitled to additional
compensation for whether or not they were entitled to the same is a question of law which the respondent court
answered correctly. The "waiver rule" is not applicable in the case at bar. Additional compensation for nighttime
work is founded on public policy, hence the same cannot be waived. (Article 6, Civil Code). On this matter, We
believe that the respondent court acted according to justice and equity and the substantial merits of the case,
without regard to technicalities or legal forms and should be sustained.
The third assignment of error is likewise without merit. The fact that only three of the private respondents testified
in court does not adversely affect the interests of the other respondents in the case. The ruling in Dimayuga V.
Court of Industrial Relations (G.R. No. L-0213, May 27, 1957) has been abandoned in later rulings of this Court. In
Philippine Land Air-Sea Labor Union (PLASLU) vs. Sy Indong Company Rice And Corn Mill (11 SCRA 277) We
had occasion to re-examine the ruling in Dimayuga We stated:
The latter reversed the decision of the trial Judge as regards the reinstatement with backwages of ... upon the
theory that this is not a class suit; that, consequently, it is necessary and imperative that they should personally
testify and prove the charges in the complaint', and that, having failed to do so, the decision of the trial Judge in
their favor is untenable under the rule laid down in Dimayuga vs. Court of Industrial Relations, G.R. No. L-0213
(May 27,1957).
We do not share the view taken in the resolution appealed from. As the trial Judge correctly said, in Ms dissent
from said resolution,:
xxx xxx xxx
In the case of Sanchez v. Court of Industrial Relations, supra, this Court stated:
To the reproach against the challenged order in the brief of petitioners in view of only two of the seven claimants
testifying, a statement by this Court in Ormoc Sugar Co., Inc. vs. OSCO Workers Fraternity Labor Union would
suffice by way of refutation. Thus: "This Court fully agrees with the respondent that quality and not quantity of
witnesses should be the primordial consideration in the appraisal of evidence.' Barely eight days later, in another
decision, the above statement was given concrete expression. Thus: 'The bases of the awards were not only the
respective affidavits of the claimants but the testimonies of 24 witnesses (because 6 were not given credence by
the court below) who Identified the said 239 claimants. The contention of petitions on this point is therefore
unfounded Moveover in Philippine Land-Air-Sea Labor Union (PLASLU) v. Sy Indong company Rice & Corn Mill,
this Court, through the present Chief Justice rejected as untenable the theory of the Court of Industrial Relations
concerning the imperative needs of all the claimants to testify personality and prove their charges in the complaint.
As tersely put: 'We do not share the view taken in the resolution appealed from.
The petitioner's contention that its employees fully understood what they signed when they entered into the
contracts of employment and that they should be bound by their voluntary commitments is anachronistic in this
time and age.
The Mercury Drug Co., Inc., maintains a chain of drugstores that are open every day of the week and, for some
stores, up to very late at night because of the nature of the pharmaceutical retail business. The respondents knew

that they had to work Sundays and holidays and at night, not as exceptions to the rule but as part of the regular
course of employment. Presented with contracts setting their compensation on an annual basis with an express
waiver of extra compensation for work on Sundays and holidays, the workers did not have much choice. The
private respondents were at a disadvantage insofar as the contractual relationship was concerned. Workers in our
country do not have the luxury or freedom of declining job openings or filing resignations even when some terms
and conditions of employment are not only onerous and inequitous but illegal. It is precisely because of this
situation that the framers of the Constitution embodied the provisions on social justice (Section 6, Article 11) and
protection to labor (Section 9, Article I I) in the Declaration of Principles And State Policies.
It is pursuant to these constitutional mandates that the courts are ever vigilant to protect the rights of workers who
are placed in contractually disadvantageous positions and who sign waivers or provisions contrary to law and
public policy.
WHEREFORE, the petition is hereby dismissed. The decision and resolution appealed from are affirmed with
costs against the petitioner.
SO ORDERED.

received any separation pay, he was dismissed.

A complaint was then filed by the private respondent against Seaborne for illegal dismissal, illegal deduction, and
unpaid wages, which was later amended to include petitioner Gatan as party-respondent and to embrace claims
for overtime pay, holiday pay, 13th month pay, sick leave pay, damages, and attorney's fees.
Labor Arbiter Eduardo G. Magno rendered judgment on August 5, 1988, the dispositive portion of which reads
thus:
WHEREFORE, judgment is hereby rendered declaring the dismissal of the complainant as illegal. Respondent is
hereby ordered to reinstate complainant to his former position without loss of seniority rights but without
backwages. Backwages will lie upon refusal of respondent to reinstate complainant. However, respondent is
hereby ordered to pay complainant the amount of Two Hundred Fifty (P250.00) Pesos representing the amount
illegally deducted from complainant.
SO ORDERED.
The private respondent appealed to the National Labor Relations Commission which, in a decision promulgated
on March 21, 1989, modified the labor arbiter's ruling, to wit:
WHEREFORE, the decision appealed from is hereby MODIFIED, ordering the respondents to reinstate
complainant to his former position, without loss of seniority right and other privileges, with full backwages from the
date his salary is (sic) withheld from him until his actual reinstatement, and to pay complainant his holiday pay,
13th month pay, service incentive leave benefits for 1987 and 1988, plus the amount illegally deducted from his
salary, and attorney's fees of 10% of the total amount herein awarded.
SO ORDERED.
Petitioners' first and second motions for reconsideration were both denied by the public respondent for lack of
merit.
In this petition, the petitioners are asking the Court to set aside and nullify the NLRC's decision dated March 21,
1989, and the resolutions denying their motions for reconsideration, on the following grounds: (a) the NLRC erred
in concluding that the private respondent is entitled to service incentive leave benefits as well as holiday and 13th
month pay; and (b) the NLRC erred in holding petitioner Jerry Ronaldo Gatan personally liable, with the petitioner
corporation, for the payment of backwages, holiday pay, 13th month pay, service incentive leave benefits, and
attorney's fees.
Having limited the issues to these two questions, the other portions of the challenged decision are deemed
admitted by the petitioners. Hence, we will no longer dwell on the issue of dismissal, reinstatement, award of
backwages and attorney's fees, and reimbursement of the amount illegally deducted from the private respondent's
salary.

G.R. No. 88795 October 4, 1994

SEABORNE CARRIERS CORPORATION and JERRY RONALDO GATAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ARMANDO A. TERNIDA, respondents.
Atienza, Tabora, Del Rosario & Castillo for petitioners.
Julio F. Andress, Jr. for private respondent.
ROMERO, J.:
The private respondent began working for Seaborne Carriers Corporation (Seaborne) on April 8, 1983 as Tug
Master with a monthly salary of P2,475.00. On September 15, 1987, the tugboat he was manning met an accident.
Half of the cost of repairs totalling P5,000.00 was shouldered by Seaborne. Private respondent was required to
pay for the other half, and an initial salary deduction of P250.00 was actually made by Seaborne. On September
24, 1987, he sought permission to go on leave of absence to ask from the Department of Labor and Employment if
such deduction was legal, but this request was not granted. Instead, he was asked by petitioner Gatan,
Seaborne's president and manager, to tender his resignation. When he refused to resign, as he had not yet

The petitioners aver that the award to private respondent should not have included service incentive pay because
it was never sought in the complaint and the private respondent is already enjoying vacation leave benefits, which
bars the employee from entitlement to the yearly service incentive leave benefit mandated by Article 95 of the
Labor Code.
With regard to the award of 13th month pay and holiday pay, the petitioners allege that the private respondent
failed to prove or establish that he is entitled to the same, and that he did not specify which holiday or what year
he was not paid said benefits.
These arguments are untenable.
The private respondent's allegation of non-payment of these benefits, to which he is by law entitled, is a negative
allegation which need not be supported by evidence unless it is an essential part of the cause of action. 1 It must
be noted that the main cause of action of the private respondent is his illegal dismissal, and the claim for the
monetary benefits is but an incident of the protest against such dismissal. Thus, the burden of proving that
payment of said benefits has been made rests upon the party who will suffer if no evidence at all is presented by
either party, that is, the petitioners as private respondent's employer.

This brings us to the second issue raised by the petitioners: Should Jerry Ronaldo Gatan, as president and
general manager of Seaborne be held responsible to the private respondent for the payment of backwages and
other monetary benefits awarded by the NLRC?
The petitioners rely on the case of Garcia v. NLRC, et al., 2 where the personal liability of corporate officers to
dismissed employees was made to depend on whether such officers acted with evident malice and bad faith. They
argue that the assailed decision did not make any finding that Jerry Gatan acted maliciously or in bad faith in
terminating the services of private respondent.
This contention is meritorious.
All that the evidence shows is that petitioner Gatan ordered the private respondent to resign and dismissed him
when he failed to do so without considering the reason for such refusal, which is the non-payment of his
separation pay. There is nothing on record which would prove the insinuation that Jerry Gatan sanctioned the
deduction of P250.00 from private respondent's salary, as well as the denial of the latter's request for leave of
absence.
These factors are simply not sufficient to convince this Court that petitioner Gatan acted with malice and in bad
faith in the termination of private respondent's employment. In this regard only, the assailed decision dated March
21, 1989 should be accordingly modified.
IN VIEW OF THE FOREGOING, the instant petition is DISMISSED and the liability of petitioner Seaborne Carriers
Corporation to private respondent is hereby affirmed. Petitioner Jerry Ronaldo Gatan is, however, exempted from
said liability for lack of material proof on his culpability. Let the records of this case be remanded to the public
respondent for immediate execution of judgment.
SO ORDERED.

employed by NSC as a technician in its Special Products Group with a monthly salary of P5,501.00 assigned to
the graveyard shift starting at ten o' clock in the evening until six o' clock in the morning.
On 8 January 1993 Santos did not report for work on his shift. He resumed his duties as night shift Technician
Support only on 9 January 1993. However, at the end of his shift the following morning, he made two (2) entries in
his daily time record (DTR) to make it appear that he worked on both the 8th and 9th of January 1993.
His immediate supervisor, Mr. Joel Limsiaco, unknown to private respondent Santos, received the report that there
was no technician in the graveyard shift of 8 January 1993. Thus, Limsiaco checked the DTRs and found out that
Santos indeed did not report for work on 8 January. But when he checked Santos' DTR again in the morning of 9
January 1993 he found the entry made by Santos for the day before.
Informal investigations were conducted by management. Santos was required in a memorandum to explain in
writing within 48 hours from notice why no disciplinary action should be taken against him for dishonesty, falsifying
daily time record (DTR) and violation of company rules and regulations. 1 On 11 January 1993 Santos submitted
his written explanation alleging that he was ill on the day he was absent. As regards the entry on 8 January, he
alleged that it was merely due to oversight or carelessness on his part. 2
Finding Santos' explanation unsatisfactory, NSC dismissed him on 14 January 1993 on the ground of falsification
of his DTR, which act was inimical to the company and constituted dishonesty and serious misconduct. 3
Thus, on 20 January 1993, Santos filed a complaint for illegal dismissal and non-payment of back wages,
premium pay for holidays and rest days, night shift differential pay, allowances, separation pay, moral damages
and attorney's fees.
Labor Arbiter Dominador A. Almirante found that Santos was dismissed on legal grounds although he was not
afforded due process, hence, NSC was ordered to indemnify him P1,000.00. The Labor Arbiter likewise ordered
the payment of P19,801.47 representing Santos' unpaid night shift differentials. 4
NSC appealed to the National Labor Relations Commission (NLRC). In its Decision of 29 September 1995 the
NLRC affirmed the Labor Arbiter holding that his conclusions were sufficiently supported by the evidence and
therefore must be respected by the appellate tribunal because the hearing officer was in a unique position to
observe the demeanor of witnesses and to judge their credibility. 5
NSC imputes grave abuse of discretion to the NLRC in affirming the Labor Arbiter's award of night shift
differentials and P1,000.00 indemnity for alleged violation of due process. It contends that the question of nonpayment of night shift differentials was never raised as an issue nor pursued and proved by Santos in the
proceeding before the Labor Arbiter; that Santos was already paid his night shift differentials, and any further
payment to him would amount to unjust enrichment; and, that the P1,000.00 indemnity is totally unjustified as he
was afforded ample opportunity to be heard.

G.R. No. 123520 June 26, 1998

NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION, LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (4TH DIVISION) and EDGAR PHILIP C. SANTOS,
respondents.
BELLOSILLO, J.:
The main issues to be resolved in his petition for certiorari are: First, who has the burden of providing a claim for
night shift differential pay, the worker who claims not to have been paid night shift differentials, or the employer in
custody of pertinent documents which would prove the fact of payment of the same? Second, were the
requirements of due process substantially complied with in dismissing the worker?
Petitioner National Semiconductor (HK) Distribution, Ltd. (NSC for brevity), a foreign corporation licensed to do
business in the Philippines, manufactures and assembles electronic parts for export with principal office at the
Mactan Export Processing Zone, Mactan, Lapu-Lapu City. Private respondent Edgar Philip C. Santos was

We now resolve. A perusal of Santos' position paper filed before the Labor Arbiter reveals that the question of nonpayment of night shift differentials was specifically raised as an issue in the proceedings below which was never
abandoned by Santos as erroneously claimed by NSC thus
ISSUES
1. Did respondent National Semiconductor (HK) Distribution Ltd. illegally dismiss complainant Edgar Philip
Santos?
2. Is complainant Edgar Philip Santos entitled to recover unpaid salary, holiday pay, night shift differential,
allowances, separation pay, retirement benefits and moral damages? 6
And, in his prayer, Santos sought to be afforded the reliefs prayed for in his complaint.

The fact that Santos neglected to substantiate his claim for night shift differentials is not prejudicial to his cause.
After all, the burden of proving payment rests on petitioner NSC. Santos' allegation of non-payment of this benefit,
to which he is by law entitled, is a negative allegation which need not be supported by evidence unless it is an
essential part of his cause of action. It must be noted that his main cause of action is his illegal dismissal, and the
claim for night shift differential is but an incident of the protest against such dismissal. Thus, the burden of proving

that payment of such benefit has been made rests upon the party who will suffer if no evidence at all is presented
by either party. 8 Moreover, in Jimerez v. National Labor Relations Commission, 9 we declared
As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege nonpayment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to
prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment.
For sure, private respondent cannot adequately prove the fact of non-payment of night shift differentials since the
pertinent employee files, payrolls, records, remittances and other similar documents which will show that
private respondent rendered night shift work; the time he rendered services; and, the amounts owed as night shift
differentials are not in his possession but in the custody and absolute control of petitioner.
Private respondent has been in petitioner's employ for five (5) years starting 13 January 1988 when he was
hired to 14 January 1993 when his services were terminated and petitioner never denied that private
respondent rendered night shift work. In fact, it even presented some documents purporting to prove that private
respondent was assigned to work on the night shift.
By choosing not to fully and completely disclose information to prove that it had paid all the night shift differentials
due to private respondent, petitioner failed to discharge the burden of proof. Consequently, no grave abuse of
discretion can be ascribed to the NLRC for sustaining the Labor Arbiter when it ruled thus
It is not disputed that complainant was regularly assigned to a night shift (10:00 P.M. to 7:00 A.M.). Under Section
2, Rule II, Book Three of the Implementing Rules of the Labor Code, complainant is entitled to an additional
benefit of not less ten percent (10%) of his regular wage for each hour of work performed. The record is bereft of
evidence that respondent has paid complainant this benefit. The best evidence for respondent corporation would
have been the payrolls, vouchers, daily time records and the like which under Sections 6, 7, 8, 11 and 12, Rule X,
Book III of the Implementing Rules it is obliged to keep. Its failure gives rise to the presumption that either it does
not have them or if it does, their presentation is prejudicial to its cause.
We rule therefore that complainant should be awarded a night shift differential but limited to there (3) years
considering the prescriptive period of money claims. 10
On the issue of due process, we agree with petitioner that Santos was accorded full opportunity to be heard before
he was dismissed.

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain one's side. 11 In the instant case, petitioner furnished private respondent notice as to the
particular acts which constituted the ground for his dismissal. By requiring him to submit a written explanation
within 48 hours from receipt of the notice, the company gave him the opportunity to be heard in his defense.
Private respondent availed of this chance by submitting a written explanation. Furthermore, investigations on the
incident were actually conducted on 9 January 1993 and 11 January 1993. Mr. Reynaldo Gandionco, petitioner's
witness, testified:
Q: I reform my question. Was there an investigation conducted on the complainant regarding the alleged
falsification of DTR?
A: Yes, ma'am, there was.
Q: Who was present during the alleged investigation? I am referring to the first investigation?
A: The first investigation we were many. We were Daryll Go, Joel Limsiaco, Edgar Philip Santos and me.
Q: When was the first investigation conducted?
A: On the night of January 9, 1993.
xxx xxx xxx
Q: During the second investigation, who were present?
A: We were: Daryll Go, Edgar Philip Santos and me.
Q: And when was the second investigation conducted?
A: It was on January 11, 1993 in the afternoon. 12
Finally, private respondent was notified on 14 January 1993 of the management's decision to terminate his
services.
Thus, it is clear the minimum requirements of due process have been fulfilled by petitioner.
That the investigations conducted by petitioner may not be considered formal or recorded hearings or
investigations is immaterial. A formal or trial type hearing is not all times and in all instances essential to due
process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy. 13 It is deemed sufficient for the employer to follow the natural sequence of
notice, hearing and judgment. 14
WHEREFORE, petition is DISMISSED. The NLRC Decision of 29 September 1995 is AFFIRMED subject to the
modification that the award of P1,000.00 as indemnity is DELETED in accordance with the foregoing discussion.
SO ORDERED.